Damage limitation: working it out

In the BBC self-satire W1A, the protagonists have a weekly meeting described as the “Thursday morning damage limitation meeting”. Everyone in modern day practice can probably sympathise with the sentiment! Effective risk management should of course reduce the need for “damage limitation”. However, there are always going to be problems which require to be managed, and their effective management in itself amounts to risk management.

Problem situations may be retrievable. In any event there may be a duty actively to investigate what happened, and steps may be available to limit any adverse financial exposure and impact on client relations.

There is also the question of whether there is a circumstance or claim requiring to be reported to insurance brokers.

Identification and investigation

The first priority is to have in place a system for identifying and investigating problems. This means having (a) an appropriate system of supervision, to ensure that fee earner activities are appropriately under review as transactions progress, and (b) an environment in which staff are comfortable about reporting problems when they arise. This was easier in the days of postal communication. Email is harder to monitor, but the priority is to have an appropriate approval system, and a system of copying in ensures a “four eyes” review of what is happening.

Investigation will be the role either of the partner or director in charge of the matter or the claims and complaints partner. This will depend on whether one is dealing with a “glitch” which can be readily remedied, or a more intractable problem or an actual claim or complaint which will require to be escalated. Most firms now have terms and conditions that nominate a partner to handle claims and complaints. Firms should have their own procedure and timescales for such investigations.

Internal handling

An early decision should be made on whether circumstances have arisen which might give rise to a claim. If so, this requires to be intimated straightaway to PII brokers. It makes sense to err on the side of caution in reporting. If the client is unaware of the problem, immediate consideration must be given to reporting to the client and how that should be done. It may make sense to discuss that with brokers first.

Concurrently, consideration must be given to whether there may be a conflict of interest in continuing to act. If the problem is capable of being remedied, generally there should not be a conflict except perhaps in relation to remedial costs. It might well make sense for the remedial work to be carried out and the issue of who pays to be determined thereafter. If the problem cannot be remedied, or the effectiveness of any remedy is in doubt, close consideration must be given to whether to withdraw from acting.

A missed time bar, for example, might be capable of being remedied if there is a basis for allowing proceedings to be raised late. However, there will inevitably be uncertainty as to whether this will be permitted, and the question then is whether to offer to make an application on behalf of the client or pass the matter to another solicitor to provide independent advice.

The decision is a sensitive one. Withdrawing prematurely from acting can prejudice a client in terms of the handling of business and the cost involved, and may also prompt a client to make an early claim. However, continuing to act where there is a conflict of interest may in itself give rise to liability, and indeed possible misconduct allegations. There are clear benefits to discussing such matters with Professional Practice.
Possible solutions

The possible solutions, and their implications, will depend on the nature of the problem. An error in court pleadings may be capable of being rectified by adjustment or amendment. An error in missives may be capable of being rectified by an amending missive. An error in a deed may or may not be capable of being rectified by a corrective deed.

Some matters are capable of being rectified but only at a cost. A lost will can be addressed by an action for proving the tenor. An error of expression in a contract might be capable of being remedied under the procedure for rectification of documents. However sometimes there is no obvious remedy. If missives have been concluded it may not be possible to rectify an error. If a security has not been registered, other securities may have been registered in the interim.

If a problem comes to light when a claim is intimated, insurers will handle the claim. If it comes to light beforehand, the handling should be discussed with brokers and insurers. With a lost will it may make sense for the firm responsible to conduct the action to prove its tenor. Even if it has to bear the cost, that may be the best and most cost-effective way of handling the matter.

Handling the client

Critical in problem situations is the handling of the client. If a problem is avoided or not addressed, or worst of all covered up, all evidence points to a worse result at the end of the day, both in financial terms and in terms of the client relationship. If the client is approached openly with an explanation and a proposed way forward, there is a much better chance that the situation can be managed and any cost kept to a minimum.

The question can arise of whether to apologise. If there are no financial implications to the solution (other than, for example, bearing the cost of amendment of a document or other “internal cost”), an open apology may be the best approach. The offer of an apology is a factor that the SLCC would take into account in considering any complaint. However, if there are financial implications to admitting responsibility, clearly nothing should be done to prejudice the insurance position, and the matter should be discussed with brokers.

How to deal with the client would be a matter for judgment. A letter or email may be appropriate, but such things may be better communicated at a face-to-face meeting. The complaints handling partner might want to be involved. There is no one answer, but certainly such situations benefit from full consideration of the options.

Dispute resolution

If the problem requires some further mechanism to unlock it, there are a range of options. The first, simple option is to deal with the matter through the firm’s internal complaints procedure. The benefit for the client is that this will cost them nothing and they will get the benefit of a senior person at the firm reviewing the work carried out.

However, that may be insufficient for the client. The next step up would be a complaint to the SLCC. The SLCC will seek to conciliate where possible, and there is nothing to stop parties agreeing the terms of a remit. If there are aspects of potential misconduct, that might, of course, require remit to the Law Society of Scotland.

Mediation or expert referral represent other approaches. Mediation has successfully resolved a considerable number of claims and complaints against solicitors. If expert referral is attractive, the Society will assist with identifying a suitable, independent expert. Fortunately, it is still a very small percentage of claims or complaints against solicitors that end up in court, and it is very much in the interests of the profession to keep it that way.

Learning lessons

One of the most important initiatives in risk management in recent years has been the closer monitoring of causes of claims and complaints. Master Policy broker Marsh publishes an analysis of these. Such a thorough analysis makes it much easier to target risk management and training procedures. Each firm should aim to have its own records and use these to develop training and supervision with a view to improving claims records generally.

Maybe then the “damage limitation meeting” will evolve into the “damage elimination meeting”!