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The most widely reported headline from the recently published Legal Services Regulation Authority (LSRA) Annual Report for 2024 should make for sobering reading not just for solicitors, but also their professional indemnity (PI) insurers.
According to LSRA CEO, Dr Brian J Doherty, the number of complaints received by the LSRA in 2024 was up 14% when compared with 2023, “largely due to a high volume of complaints by banks in relation to failures by solicitors to comply with undertakings”.
Market rocked by breach of undertaking claims
None of the stakeholders who were around at the time need reminding of the insurance climate for professionals, and solicitors in particular, following the 2008 economic crash. The years that followed saw a flood of PI claims against solicitors, many arising from breaches of undertaking by solicitors in property transactions.
With plummeting asset prices and limited avenues for recovery, solicitors and their insurers became the ‘last man standing’ in many failed ‘Celtic Tiger’- era property deals.
The frequency and severity of those claims was unprecedented, up to that time and since. Some insurers exited the Irish market altogether, others sustained significant losses, and the solicitors' profession itself faced an existential threat.
Relative stability restored
Since those turbulent years, relative stability has returned to the solicitors' PI market.
Much of that is down to improved risk management and professional standards. Poor practices that contributed to the flood of claims were addressed through a concerted effort by firms, the Law Society of Ireland and insurers alike.
Today, the use of undertakings registers, now commonly insisted on by insurers and recommended by the Law Society, are seen as a basic risk control measure.
A different picture to the UK
Irish solicitors have also, in recent years, avoided the high volume of PI litigation seen in the UK. There, over 50% of all litigated PI claims since 2020 have been against solicitors, many arising from buyer-funded developments, ‘right to buy’, and issues like escalating ground rent. Thankfully, Ireland has largely avoided that wave.
Warning signs
That said, the 14% increase in complaints recorded by the LSRA may be an early warning sign of trouble ahead.
It is worth recalling that before the 2008 flood of PI claims, there was a surge in complaints to the Law Society of Ireland, primarily from financial instructions regarding solicitors’ failure to comply with their undertakings. Many of those complaints ultimately led to professional negligence proceedings.
So, are we seeing history repeat itself?
What next?
The rise in complaints raises serious questions:
- What is behind the recent rise in complaints by financial institutions to the LRSA for solicitors’ failure to comply with undertakings?
- Has the profession become complacent?
- Have standards slipped?
- Are financial institutions reviewing their own lending files and security, perhaps in anticipation of a fall in asset prices?
We simply do not know. But the questions alone should prompt action.
For conveyancing solicitors, now is the time to review internal procedures and ensure full compliance with undertakings. With the next PI renewal season approaching, insurers and brokers should engage with firms to highlight the risk and work collaboratively to mitigate potential exposures.
By working together, the profession and its insurers can help avoid a return to the expensive mistakes of the past.
Insurance and reinsurance
Ireland
United Kingdom