Conveyancing & Professional Indemnity Insurance – The Impact of Imposter Fraud?

By Richard Gledhill

You may have seen our bulletin in Spring 2016 touching on this subject, please see the link below if not.

Conveyancing — Know Your Client Procedures

Similar cases have since come to light and will undoubtedly have some impact on the Professional Indemnity Insurance (PII) market for those Solicitors undertaking conveyancing work; One very
high profile case, in particular, you will likely be aware of, Dreamvar v Mishcon de Reya, is now causing some concern. There is much comment to be found on this case given its outcome and in view of this, we don’t propose to repeat the detail here (a brief summary can be found on the Law Gazette website).

We would, however, point out Judge David Railton QC’s comments; “it is common ground that Mishcon de Reya is insured for events such as this and that its insurance coverage is sufficient to cover, in full, the loss suffered should it not be excused from liability”, adding that Mishcon de Reya were in a better position than the client to face the consequences with the ‘only practical remedy open to the client being to target the city firm’.

Whilst this matter will probably go to appeal, there is in the meantime some debate as to the possible extent of its impact on PI Insurers’ attitude going forward. Whilst perhaps too early to say right now, certainly we would be expecting those Insurers currently offering Minimum Terms and Conditions (MTC) PI cover for Conveyancing firms to continue doing so but should these losses mount up then the obvious outcome would be an increase in premiums for some as Insurers elect to take a closer look at the risk management procedures in place.

Many feel that Dreamvar v Mishcon de Reya will be a real concern for solicitors acting for purchaser clients. Indeed, commenting that this decision means ‘the balance of risk swings firmly against the buy-side of the transaction’, one of the leading PI Insurers in the sector, QBE, have already issued to their own Insureds a guidance note which focuses on mitigating the risk of fraud being perpetrated in any way (i.e. not favouring either buyer or seller). This guidance note addresses Risk Assessment (including measures re-establishing ownership and entitlement to sell the property), Risk Mitigation (whether acting for sellers or buyers), Escalation of Concerns, Warning Clients and Fraud Prevention Training.

The case itself not really offering a definitive way forward for solicitors, such guidance notes should prove helpful, pending any more detailed written guidance that might ultimately be forthcoming from the Law Society, whom we understand may look to intervene in an appeal. QBE then go further and suggest that the profession perhaps now ought to work together in a more coordinated fashion in order to present a robust response to what is now commonly referred to as a fraud epidemic.

Download your copy of “Conveyancing & Professional Indemnity Insurance – The Impact of Imposter Fraud?”

If you do require further background information in this regard, please get in touch with your usual contact at MFL Professional or as below and we shall be happy to assist as part of an overview of your PII, Crime and Cyber Protection arrangements.