INDIA BUSINESS WORLD - MAY - JUNE 2007
The Month that was ...

PROFESSIONAL NEGLIGENCE INSURANCE FOR LAWYERS

There is good news for lawyers and companies that make big investment decisions based on their advice. The government is thinking of making it mandatory for lawyers to be insured against claims for damages from their clients who think the service received was not worth the fee given.

Mandatory professional negligence insurance exists in other countries for professionals such lawyers, doctors and architects, but is a new concept in India. The law ministry is considering a proposal to introduce this in India. "We are seeking comments from all stake holders on this issue", said a government official, adding that it might take some time for the proposal to fructify. Such policies usually cover only the negligence of the professional and not any wilful act by the insured. This is essential as the cost of litigation could be high even though the professional is not found responsible for his client's financial loss due to the advice.

"The opinion given by lawyers on big ticket transactions is very valuable and if the client suffers on account of an undisclosed liability, he can only move court in the absence of an insurance cover. Litigation is costly and time consuming and insurance is the best solution in the circumstance", said Diljeet Titus, senior member, Titus and Company, a law firm that had taken professional liability insurance for a few transactions. Rajiv Luthra, founder and managing partner of law firms Luthra & Luthra said it could enhance accountability among lawyers.

Some senior lawyers, however, believe that making it mandatory to have such insurance would be like putting the cart in front of the horse. "In India, there is no strong framework to hold a lawyer accountable for his service, nor awareness about the remedies in law. Before having mandatory insurance, these issues should be addressed", said a senior Delhi based lawyer who gives investment advises. Now, a dissatisfied client can approach the Bar Council of India and file a complaint against the lawyer.