MPR offers a financial lines package policy to protect the assets of law firms against the risks associated with their operational environment.
Protection of the assets of the law firm, along with other organisations and managers within the structure, is vital within an increasingly challenging operating environment. The Management Risks Insurance package policy is an integrated solution and provides four important sections of cover, each with its own limit. This delivers a quick and easy to place solution for law firms of all types.
Why do your clients need Management Risks Insurance?
- Partners, members, directors, officers and senior managers can be exposed to a broad spectrum of risks. Specialist lawyers do not come cheap and hourly rates can be many hundreds of pounds.
- Good human resources practices can go a long way to mitigate exposures to claims by employees but cannot eliminate them completely.
- According to the Association of Certified Fraud Examiners, the average organisation loses about 6% of its total annual revenue to fraud and abuse committed by its own employees.
What does the policy cover?
A comprehensive package policy providing cover for:
- Partners, members, directors and officers insurance;
- Employment practices insurance;
- Partnership insurance;
- Employee Crime, Crime using Computers and Social Engineering Crime.
What limits are available?
Your clients can choose the limits they need for each area of exposure as each section has a separate limit.
What does an underwriter like to see?
- Financially sound organisations with consistent and experienced management.
- Comprehensive and robust risk management strategies.
- Organisations with good checks and controls in place, such as:
- HR background checks and reference procedures;
- written policies on discrimination, harassment, discipline and termination;
- call back procedures for phone transfer requests;
- structured procedures around bank account changes;
dual controls.
Is there anything an underwriter wouldn’t insure?
- Newly established organisations may need more focus to get a better understanding of the dynamics and risk profile.
- The policy contains exclusions to remove disputes that are not in the scope of this kind of insurance. These include professional liability and disputes over constitutional issues.
- Overseas offices can be a challenge environment and will need additional scrutiny.
- Whatever the risk, underwriters will always try to find solutions, even if the policy terms may be more cautious and reflective of the risk characteristics.
Why choose MPR?
- Deep experience over many years in all the products we underwrite
- Simple and clearly stated policy language with the removal of ambiguity
- A straightforward, broker focussed, technical and service based proposition
- Strong financial rating
Key Features
- Comprehensive cover
- Management liability insurance for law firms has never been as widely available as it has been for private organisations. This policy delivers a strong solution across a range of exposures that law firms face and integrates cover for all types of operational structure.
- Important cover for the firm itself
- The cover provided by this section can provide valuable protection in many areas and defence costs for a number of scenarios for the firm.
What can go wrong?
The operational environment continues to pose existing and new challenges for organisations.
Law firms are subject to many of the new and existing laws, which make no distinction between incorporated and unincorporated organisations. Development of themes such as social engineering fraud, put assets at risk on a daily basis.
Employment practice claims are on the increase and can be time consuming and expensive.
Typically, defending a straightforward Employment Tribunal claim can cost anything between £8,000 and £12,000. For a more complex claim, say one that includes discrimination, these costs can quite easily rise above £20,000. Although fair and reasonable employers which have proper procedures in place will face more limited exposure to tribunal claims, employment practices liability cover helps for unexpected claims that may be brought.
A supplier to a law firm notified irregularities in respect of a member of staff. An internal investigation followed and confirmed that the employee was receiving irregular and unauthorised commission payments from some of the suppliers to the firm, all of whom he had introduced. The employee was making arrangements with some of these suppliers to inflate their invoices in order to maximise his ‘commissions’, as well as putting in place arrangements for work to be done by these suppliers for other organisations, which were connected to the same employee. The loss to the firm from these payments exceeded £160,000.
Supplier and vendor fraud, including ‘ghost’ companies, are major sources of employee fraud. A straightforward controls framework around appointment of new suppliers would have extinguished the opportunity to perpetrate the fraud, and dual controls would have also mitigated the effects. Left unchecked over a period of year, overcharging for services rendered and charging for services that were never performed accrued to a significant and meaningful amount.
Money was moved from a client funds account by the finance director to settle a tax payment that was due. This subsequently proved to have been unnecessary but repayment was also delayed without explanation. A Solicitors Regulatory Authority investigation put a Section 43 order in place. The COLP of the practice was targeted by the SRA for failure to supervise the finance director and for the breaches of Solicitors Accounts Rules that took place. The allegations were not founded on dishonesty but on impropriety. Costs associated with case were over £40,000.
It is helpful to know that, if the worst happens, there is a product specifically crafted to accommodate the consequences of these unforeseen and undesirable events. Regulatory investigations can be stressful and difficult and will carry a cost. Having a policy written around the law firm structure has the potential to deliver a meaningful benefit.
