©New Straits
Times (Used by permission)
by Anis Ibrahim
KUALA LUMPUR: Nine lawyers went out of business last year for the wrong
reason: They could not afford premiums under the Bar Council’s professional
indemnity insurance (PII) scheme.
They were forced to close shop because they could not make ends meet after
paying the insurers.
Most of the affected ran small firms, which could not afford the "claims
loading" that can hike premiums by up to 50 times the original amount.
Claims loading comes into play when there is a suit against a firm. The company
has to pay the extra for five years in addition to annual premiums.
If a lawyer wants his annual practising certificate renewed, premiums under the
PII scheme must be settled.
But all this is set to change from this year.
Bar Council secretary Ragunath Kesavan said fewer lawyers would be forced to
leave practice merely because they could not pay claims loading.
"From this year, firms will no longer have to pay loading just because there is
a suit against them. Firms will only pay the extra if they are found to be at
fault and after the insurers pay out."
Ragunath said the claims loading had become excessive.
He cited the case of a firm that paid only RM7,200 premiums for seven lawyers
but had to fork out RM63,000 after claims loading.
"Another firm once had to pay RM42,000 per lawyer with claims loading but only
RM815 before that."
Ragunath, who is also chairman of the Professional Indemnity Insurance
Committee, said insurers were asked to change their terms as it was unfair for
lawyers to be driven out of their jobs because of high premiums.
"The loosening of the claims loading clause was out of concern for smaller
firms. Practices with fewer than five lawyers are most affected by the claims
loading."
Some firms have gone to the extent of not informing insurers of legal action to
avoid the extra payment.
"When firms decide to defend themselves, complainants will not be protected
under the PII, which defeats the purpose of the scheme. What we had was a scheme
which did not work.
"Lawyers who are negligent are not necessarily bad. What happened to them could
happen to any one of us. So it is important that we have a PII scheme that works
in the clients’ interests as well as ours," said Ragunath.
Set up in 1992, the PII scheme indemnifies lawyers from claims by clients, such
as negligence of an employee or partner, and claims by fellow lawyers, such as
defamation.
Ragunath said as the record of claims made under the PII was based on lawyers’
notifications, the number of writs filed against law firms could be higher.
There were 257 notifications in 2003, followed by 200 in 2004, 187 in 2005 and
111 up to October last year.
Forty per cent of the complaints concerned conveyancing matters, such as a
failure to enter caveats or conduct a land search.
Further changes are in store. By next year, the Bar Council intends to take over
management of the PII scheme, like what is done by the law societies in
Australia and British Columbia, Canada.
"This means greater control over the PII and lower premiums. We will not be held
to ransom by our insurers."