Law: Taking liability to excess: Cases of solicitors being sued by their employers remain a problem, writes Sharon Wallach

Cases of employed solicitors being sued for negligence by their firms are being highlighted by the Young Solicitors Group (YSG). The practice, according to the group's chairwoman, Geraldine McCool, is relatively rare but persistent - some three to six cases a year since the mid-1980s.

The problem stems from the excess on professional indemnity insurance policies. This is currently calculated as 1 per cent of a firm's gross fee income, with a minimum of pounds 3,000 and a maximum of pounds 150,000 per claim. The cover is also subject to an aggregate provision that the maximum claim in any one year is three times the deductible.

What is happening, says the YSG, is that in cases of alleged negligence by employee solicitors, they are being sued by their firms for these uninsured amounts.

In theory, an employee may take out their own professional negligence cover to offset these deductibles, but this would be prohibitively expensive. Firms may buy out or reduce their deductibles at extra cost, but, say assistant solicitors, this is a decision they cannot take.

Janice Cunningham, a locum solicitor, is currently facing an action by a former employer, Fairchild Greig of Acton, west London, for alleged negligence on a personal injury case. She left the firm in March 1991 after a six-month placement, but it was not until April 1993 that she was notified of the intended action, and it was last October before proceedings were issued.

Details of the claim against Miss Cunningham are sub judice, but she does say: 'I was not dishonest or reckless in my conduct of the case.' The claim by the client against the firm has already been settled. She suspects that it was a commercial decision not to involve her at that stage. 'To have involved me as a third party would have dragged the case out for years,' she says.

Last June, Miss Cunningham had a meeting with officials of Solicitors Indemnity Fund, which provides professional indemnity cover for solicitors, and the Law Society. 'They were very sympathetic, and rang Fairchild Greig to try to dissuade them from taking action, but it seemed to make things worse. It may even have provoked them to take action. Who knows?'

Miss Cunningham, who is the chairwoman of the Locum Solicitors Group, is strongly defending the proceedings against her. 'I did a lot of good work for Fairchild Greig. I didn't share in the profits, so why should I have to pay for their losses, on one out of a large number of cases I was handling for them?'

Fighting the case is likely to cost Miss Cunningham a lot of money, not least for expensive specialist legal representation. But she is determined to fight on, even though she is 'pretty disillusioned' with the profession, and at times considers giving up legal work. 'I feel afraid of making important decisions on cases for fear of another claim. How can anyone work like that?'

But she is also conscious of a sense of injustice. 'As well as wishing to vindicate myself,' she says, 'I hope that fighting this case will help draw attention to the risk that thousands of solicitors - assistants, salaried partners and locums - in private practice run, of facing similar claims which can bankrupt them and ruin their professional lives.'

The YSG believes that although most of the cases so far brought to its attention cover excesses on insurance, an employee might also be liable for any uninsured sums. Ms McCool cites other cases. In one, an assistant solicitor was told that his client's bad debts to the firm would be deducted from his wages. In another, an assistant was held liable for draftsman's fees of pounds 1,000 incurred in error.

'We've heard of writs for pounds 6,000 or pounds 10,000, which include unliquidated amounts for loss of goodwill,' Ms McCool says. 'And the legal costs involved can be enormous.' Most of these cases are resolved, she says, if not always amicably. 'The firms usually realise that proceeding would be bad publicity, or the assistant moves on.'

The YSG has long been campaigning for action. 'Since 1985, when the YSG first got involved, the law has not changed,' Ms McCool says. 'What we are looking for is a change either in the indemnity rules, or in the Solicitors Act. The Law Society has looked at all this and decided that nothing needed to be changed. We think it does.'

Two years ago, the group wrote to the then Master of the Rolls, Lord Donaldson, seeking his support for change. He said he agreed with the Law Society that the matter could be taken into account when agreeing terms of employment, but he also agreed with the YSG that 'in the real world solicitor employers may not be attracted to an applicant whose mind appears to be concentrated upon the likelihood of his being negligent.'

He suggested instead that the indemnity scheme could be modified to provide 'an additional special category of personal indemnity for employed solicitors who paid an additional premium to protect them in respect of claims in negligence (but not fraud, dishonesty or crime) . . . up to the limit of their employer's deductible.'

'The Law Society has termed it a disgraceful practice, both in the standards and guidance committee and in council, but has not gone public with that view as far as I can see,' says Ms McCool.

Christopher Bramall, head of professional ethics at the Law Society, says: 'I don't think anybody likes this way of behaving very much. We get occasional calls from staff at all levels threatened with being sued, and also from principals thinking about suing, but numerically, at least, it is not a big problem.' He points out that solicitors are supposed to supervise their staff. If something goes wrong, what were they doing, he asks.

'The YSG has never managed to convince the standards and guidance committee that there should be interference in the freedom of solicitors to pursue their legal rights if they so choose. The committee has taken this very seriously. It has looked at the arguments and counter arguments on a number of occasions. The feeling is that however much one might regret it, there are things in which the society should not interfere unless it were absolutely clear that it was in the public interest.'

An incentive to action, he admits, would be if the number of cases rose sharply, 'as this could make law a much less attractive career. If this happened, we would have to look at it again.'

(Photograph omitted)