The new rules laid down by the Constitutional Court in December 2023, which will extend the three year prescription period for claims against legal practitioners in many cases (see our blog here), will have to be considered by professional indemnity insurers. Prescription will only start running once the client knows that the advice was incorrect or the mandate not properly discharged causing losses to the client. Saying nothing to the client at the outset may prolong the need to keep reserves against the claim.
Every PI policy has necessary conditions that the insured may not admit liability to the client. That does not mean that the insured should not disclose the facts to the client where this can be done without encouraging claims or admitting liability. There is a fine line between the need to avoid keeping reserves against open-ended potential claims on the one hand and encouraging more claims on the other.
As the court itself point out, there is now a blurring of the distinction between facts and the legal conclusions from the facts. Notified events will have to be looked at with a view to making appropriate decisions as to the engagement with the legal practitioner’s client.