All questions
Specific professions
i Lawyers
The Law Society is an independent professional body that represents the majority of solicitors in England and Wales. It provides support and advice to the legal profession and promotes the role of solicitors.
Solicitors are regulated by the Solicitors Regulation Authority (SRA). The SRA’s role is to prescribe standards for the solicitors’ profession to protect the public and to ensure that clients receive good service. The SRA’s rules are ‘SRA Standards and Regulations’ and comprise a collection of free-standing codes and rules covering, for example, the professional conduct of solicitors (the Code of Conduct for Solicitors, RELs and RFLs15), regulated firms (the Code of Conduct for Firms), the holding of client money (the SRA Accounts Rules) and the requirements for professional indemnity insurance (the SRA Indemnity Insurance Rules). These standards include mandatory principles for all solicitors, such as upholding the rule of law and administration of justice and acting in the best interests of clients.
A firm of solicitors must appoint a compliance officer for legal practice (COLP) and for finance and administration (COFA), who are responsible for the firm’s systems and for managing the risks to the firm’s delivery of legal services. The COLP and COFA must record any misconduct or breaches of compliance with the SRA rules and self-report breaches promptly to the SRA. The SRA has statutory grounds to intervene in the running of a firm of solicitors if it suspects dishonesty or material breaches of the SRA Handbook.
The Solicitors Disciplinary Tribunal (SDT) is an independent tribunal in which solicitors can be prosecuted for their conduct. The SDT is independent from the SRA and has its own powers and procedures. It can make findings of misconduct and impose sanctions, including fines, suspending a solicitor from practice or striking a solicitor off the Roll.
All solicitors’ firms are required to maintain professional indemnity insurance in the event of claims against the firm. The insurance policy must comply with the SRA’s Indemnity Insurance Rules. The insurance policy must be with an authorised insurer that has entered into a participating insurer’s agreement with the Law Society. The policy terms must include a limit of cover of £3 million for any one claim.
ii Medical practitioners
Negligence claims against medical practitioners can arise in any discipline and range from lower-value claims to multimillion-pound complex cases (such as brain injury caused by perinatal error, or late diagnosis of cancer). They will almost always be claims for personal injury, including where the patient denies having given informed consent to treatment.
While such claims follow the general applications of the law of tort, usually negligence (duty, breach, causation), there are key differences, particularly in relation to limitation periods and remedies. For medical claims, the limitation period is three years (except where the claimant is a child or lacks capacity) and runs from the negligent event, the claimant’s date of knowledge or the patient’s death.
In negligence claims against clinicians the claimant’s most important remedy is damages where the aim is to put the claimant in the same position he or she would have been in had the tort not occurred. Damages are split into two parts. General damages are awarded for pain, suffering and loss of amenity and are determined on a tariff-style basis (additional psychiatric injury will increase the award). Special damages are case-specific and compensate a claimant for financial loss suffered as a result of the clinician’s negligence. Provision is made for anticipated future loss with complex calculations using discounts and multipliers to ensure an appropriate outcome. Different quantification principles apply when the patient has died.
Each medical professional body has its own regulator. These include the General Medical Council (GMC) for doctors, the Nursing and Midwifery Council for nurses, and the Health and Care Professions Council for certain others, including, for example, psychologists and radiologists. Each regulatory body will set standards and codes for its members. For example, the GMC’s Good Medical Practice guidance sets out the relevant standards for doctors. All regulators stipulate that medical professionals must have adequate or appropriate indemnity arrangements in place before they can practise.
iii Banking and finance professionals
The key legislation governing the regulation of banking and financial professionals is the Financial Services and Markets Act 2000 (FSMA). Under Section 19 of FSMA a person cannot carry out a regulated activity unless authorised or exempt. Regulated activities include accepting deposits and advising on, arranging or dealing in investments.
The three main regulators are the Bank of England, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The Bank of England is primarily responsible for failing banks. The PRA promotes the safety and soundness of financial institutions, and the FCA is responsible for protecting consumers and the conduct of business. Both the PRA and the FCA promote competition within the industry.
Aside from FSMA, the main rules applicable to banks and financial professionals are contained within the PRA and FCA handbooks. Both the PRA and the FCA issue further guidance and thematic reviews, which establish expectations of banks and financial professionals.
The PRA and FCA can take disciplinary action both against banks or regulated financial institutions and against controlled function holders that have contravened their rules. In addition, by virtue of the Senior Managers and Certification Regime, the PRA and FCA’s conduct rules have also been extended beyond controlled function holders to certain other individuals within such institutions.
Claims can be brought through the courts or through the Financial Ombudsman Service (FOS) or the Pension Ombudsman Service (POS). In contrast to claims brought through the courts and the POS, claims through the FOS will not be decided on the basis of legal principles but on a fair and reasonable basis. When deciding on a fair and reasonable outcome, the FOS is expected to take account of the law, relevant rules and good practice in the industry.
The Financial Services Compensation Scheme (FSCS) acts as deposit insurance for eligible customers and is funded by financial services firms. Where an authorised financial institution is insolvent, individuals can claim up to £85,000 for deposits and, for investment or mortgage advice, £85,000 if the insolvency occurred after 1 April 2019, or otherwise £50,000. In addition, most FCA-regulated firms are required to have professional indemnity insurance as an extra financial resource and to prevent excessive claims on the FSCS.
iv Computer and information technology professionals
Claims against software and information technology professionals by their clients tend to be governed by standard form service contracts. There are a range of voluntary professional standards to which information technology professionals may subscribe and which can be written into service contracts. Among the range of issues most likely to arise in disputes are:
- the incorporation of terms and conditions into the service contract;
- interpretation of client requirements for the scope of services;
- representations relating to scope, price and timescale;
- effect of limitations of liability;
- contract termination; and
- service levels.
For organisations controlling or processing personal data, the impact of the EU and (post-Brexit) the UK General Data Protection Regulation (GDPR) will need to be considered.
Article 24(1) of both the EU GDPR and the UK GDPR requires that data controllers ‘implement appropriate technical and organisational measures to ensure and to be able to demonstrate that processing is performed in accordance with [the GDPR]’. Article 32(1) requires that data controllers and processors ‘implement appropriate technical and organisational measures to ensure a level of security appropriate to the risk’. Breach of these requirements could lead to enforcement action by the Information Commissioner’s Office in the UK and, in cross-border cases, by other EU and European Economic Area bodies. These requirements are often written into commercial agreements.
Both the EU GDPR and the UK GDPR contain rights of recourse for data subjects for data protection breaches.16 Direct claims by data subjects against data controllers have expanded significantly; however, a number of recent decisions handed down across all levels of the courts have created various potential barriers to data subject claims.17 Nevertheless, this continues to be an area of potential exposure to professional service providers controlling personal data.
v Real property surveyors
In 2022, the Royal Institution of Chartered Surveyors (RICS) published new guidance on Japanese knotweed, aimed at combating the fear that the presence of the plant must reduce the value of any neighbouring property. The guidance shifts the focus from eradicating knotweed to managing it effectively. The note is significant because the presence and impact of knotweed on properties continues to be fertile ground for litigation, with the Court of Appeal recently handing down its judgment in the case of Davies v. Bridgend County Council. Although decided without reference to the new guidance (the trial took place before the note was published), that case nevertheless gives a helpful indication of the approach a court will take when considering damage caused to a claimant’s property by the encroachment of knotweed from a defendant’s land.
The year 2022 also saw the publication of an updated version of the EWS1 form, which is used in external wall system assessments for residential buildings. The amendments address various issues that had been identified with the original version and also reflect the introduction of PAS 9980, which is a new code of practice issued by the British Standards Institution in January 2022. PAS 9980 gives recommendations and guidance for competent professionals to undertake fire risk appraisals of external wall construction for existing multistorey, multi-occupancy residential buildings. It applies where a risk is known, or suspected, to arise from the form of construction used for the external wall build-up, such as the presence of combustible material, and should now be applied where an assessor is completing an EWS1 form.
On 6 December 2022, RICS also published a new guidance note to help valuers undertaking valuations of domestic residential blocks or flats of at least five storeys or 11 metres tall. The note provides guidance on the information valuers need to take into consideration and the approach they should take when preparing a valuation, including whether it is reasonable to make certain assumptions about the subject property and the ability of the building owner to pass on any building defect costs to the leaseholder.
vi Construction professionals
Issues with fire safety defects continue to dominant the agenda for construction professionals. The outcome of the second phase of the Grenfell Enquiry is still awaited and its conclusions as to who bears responsibility for the tragedy will no doubt spark further litigation against construction professionals involved in the design and construction of other buildings with fire safety defects.
In addition, the Building Safety Act came into force in April 2022, making fundamental changes to the law relating to the construction of residential property. This Act aims to improve the process for constructing and managing high-rise residential buildings (HRBs), to ensure they are safe for anyone living in or around them. The Act establishes a regime to identify the people responsible for safety during the design, build and occupation of HRBs, and it introduces a gateway system to ensure regulatory requirements are met at different stages of the planning and construction process. It establishes the role of the Building Safety Regulator, who will be responsible for overseeing safety and standards, helping construction professionals to improve competence and leading the implementation of the new regulatory framework for HRBs. The Act also creates new mechanisms through which building owners and tenants can pursue claims, including through remediation orders and remediation contribution orders, and provides significant protections for leaseholders, including the right to sue developers for defective works up to 30 years after a home is completed, through amendments to the Defective Premises Act, which now applies to the refurbishment of residential properties as well as new builds.
vii Accountants and auditors
The accountancy and audit professions are regulated by their professional accountancy bodies, with individuals and firms being enrolled as members of one or other of them, subject to the current oversight of the Financial Reporting Council (FRC).
The FRC has statutory oversight of the audit profession pursuant to the Companies Act 2006. The FRC discharges these responsibilities by recognising certain professional accountancy bodies as recognised supervisory bodies (RSBs) and recognised qualifying bodies (RQBs). Currently, the RSBs are the Institute of Chartered Accountants for England and Wales (ICAEW) and Scotland (ICAS), Chartered Accountants Ireland (CAI) and the Association of Chartered Certified Accountants (ACCA), and the RQBs are the ICAEW, ICAS, CAI, ACCA and the Association of International Accountants.
The FRC delegates certain regulatory tasks, including registration and authorisation, monitoring, professional conduct and discipline, to the RSBs in respect of their members who are statutory auditors and audit firms. The issuance of recognised professional qualifications for statutory auditors is delegated by the FRC to the RQBs, except for individuals and firms that undertake public interest entity (PIE) audits, which must be registered with the FRC in addition to having RSB audit registration, as from 5 December 2022. The FRC ensures that each RSB and RQB properly carries out its delegated functions and undertakes certain non-delegated functions itself, including investigation and disciplinary action for public interest cases. The FRC has power to impose enforcement orders or penalties against any RSB or RQB that does not comply with its responsibilities.
Accountants and accountancy firms who are not exercising an audit function are regulated by the professional accountancy bodies to which they belong. By agreement with six professional accountancy bodies, the ICAEW, ICAS, CAI, ACCA, the Chartered Institute of Public Finance and Accountancy and the Chartered Institute of Management Accountants, the FRC has a non-statutory role in the oversight of the regulation of their members beyond those that are statutory auditors. This oversight also includes registration and authorisation, monitoring, professional conduct and discipline.
Each professional accountancy body has its own insurance scheme requirements. They all require their members to have some form of professional indemnity insurance including compulsory limits of indemnity and minimum terms.
The government previously announced plans for the FRC to be replaced by a new regulator called the Audit, Reporting and Governance Authority (ARGA) following a review of the FRC’s powers in 2018 and 2019 by Sir John Kingman, the Competition and Markets Authority and Sir Donald Brydon. The ARGA is intended to take over responsibility for licensing and regulating the large audit firms involved in PIE audits from the UK accountancy bodies, in particular the ICAEW. The intention is that the ARGA will have increased enforcement powers. Although the understanding is that the ARGA’s authority will be put on a statutory footing as soon as parliamentary time allows, it is not expected to replace the FRC any earlier than April 2024.
viii Insurance professionals
Insurance professionals have been heavily scrutinised in recent years. The FCA’s thematic review, a tough line taken by judges in claims against brokers, the implementation of the Insurance Act and, now, concerns over insured clients not being covered for all their covid-19 losses (and blaming their brokers for this) have contributed to ensuring that insurance professionals have high standards to uphold.
Insurance professionals are governed by the FCA. The FCA’s thematic review of insurance professionals investigated issues such as broker conflicts and the transparency of broker commissions. Insurance professionals have been reflecting on how they manage any conflicts of interest within their business models and making necessary changes. Following the review, merger and takeover activity within the broker community increased.
Case law has further highlighted that brokers must understand their client’s business, their client’s insurance requirements and the insurance that they are placing for their clients. Linked to this, a broker must take time to ensure that its client understands the insurance that it has procured, including highlighting any particularly onerous aspects of the policy and not exposing its client to unnecessary litigation. Decisions in cases such as Jones v. Environcom, Ground Gilbey v. JLT, Eurokey v. Giles, Dalamd Limited v. Butterworth Spengler Commercial Limited, ABN AMRO Bank NV v. Royal and Sun Alliance Insurance Plc and Brian Leighton (Garages) Ltd v. Allianz Insurance Plc have provided up-to-date guidance for brokers in this area. Topical issues include the need to understand (and explain to their clients) what a cyber policy covers; and the practical implications of a covid-19 or infectious disease exclusion.
Insurance professionals must understand the Insurance Act 2015, which came into force in August 2016. As part of the duties highlighted in the paragraphs above, a broker has a duty to understand and highlight the impact that the Insurance Act 2015 has on the policies that it is placing for its client.
Finally, insurance professionals will be aware that the FOS limit increased from £150,000 to £350,000 for complaints referred to the FOS after 1 April 2019, and this has now increased to £415,000 for complaints made after 1 April 2023 (although still applicable to acts or omissions occurring on or after 1 April 2019). Coupled with the widening of the definition of eligible FOS complainants, this could lead to an increase in attempts to make claims against insurance professionals through the FOS.
In summary, insurance professionals must understand the insurance that they are placing and the nature of the business for which they are seeking to procure insurance. They must also ensure that their clients are aware of the cover that they have and the relevant cover that they do not have. The developments in case law, the fact that lots of professionals are now paying more in premiums (but obtaining less cover), the Insurance Act 2015 and the FCA’s thematic review have made this clear.
