The Gazette 1967/71

mium of the premium required for normal pro fessional indemnity cover, approximately 15% in most cases. (b) Legal Liability for the Torts or Breach of Contract of employees In the case of Lloyd v. Grace Smith and Co., 1912 A.G. 716, a solicitor's managing clerk had been allowed by the Solicitor to receive deeds and carry through sales and conveyances. By misre presenting their nature he persuaded a client to sign documents the effect of which were to trans fer property to him. He sold the property and appropriated the proceeds. Throughout the Soli citor was innocent and unaware of the clerks activity. The House of Lords held that as the fraud was committed in course of the clerks em ployment the Solicitor was liable to the client, even though the fraud had been committed solely for the benefit of the clerk. The normal policy carries this exclusion clause "the Policy does not indemnify the insured in respect of any claim against him brought about or contributed to by the dishonest fraudulent criminal or malicious act or omission of the in sured, their predecessors in business or employees of the insured or their predecessors in business". This can be amended by deleting the word "employees". More desirable however is to have the terms of the ploicy extended to cover ex pressly claims for damages made against the Solicitor due to the dishonest fraudulent criminal or malicious conduct of employees. (c) Fidelity Guarantee In addition the Solicitor may insure against direct pecuniary loss sustained by any act of fraud or dishonesty committed by an employee. There are various types of fidelity guarantee. Cover under the headings (b) and (c) is avail able on a percentage additional premium: the normal percentage charged is approximately 20%. (d) Loss or Damage to Documents For an additional premium of approximately % the Solicitor may insure against legal liability to any person in consequence of loss, damage or destruction of documents, and the costs and re storing such documents. (e) Change in Partnerships Additional cover can be arranged to cover (a) previous liability of a new partner, or (b) con tinuing liability of a former partner. The premium in each case is normally a 5% increase in the

premium payable. Where both are insured against a premium of 7-J% is normally charged. A point to bear in mind is that once a partner retires he ceases to be covered by the policy as he no longer comes within the definition of "the insured". In the event of his continuing as a con sultant it is possible that he may give advice or information which subsequently turns out to be incorrect and produces a claim against the in sured and in these circumstances the insured or the insurers have a right to recovery against the consultant. In such circumstances an indorsement on this policy should be procured extending it to indemnify the insured in respect of claims made against them due to a negligent act or omission while the consultant is acting in that capacity to the insured. (g) Breach of Warranty of Authority It is also possible for the Solicitor to insure against breach of warranty of authoity. In the case of Mountstephan v. Lakeman an agent for a local authority instructed a contractor to pro ceed with construction work. It subsequently transpired that he was not authorised to do so. As the contractor had acted on his apparent authority the agent was held liable for breach of warranty of authority. An important point is that in order to sustain an action for breach of warranty of authority it is not necessary for the plaintiff to show that the agent acted fraudu lently or dishonestly; if a Solicitor warrants that he has authority he will be liable if in fact lie did not. Again cover is included for a percentage additional premium. These are the more important variations avail able on the professional indemnity policy. (Vol. 62, No. 2 Page 15) a decision of the Court of Appeal was reported in which it had been held that a volun tary car loan scheme whereby an employee was given the loan of a car, taxed and insured, and as a result an amount was substracted from his wages, enabled the employee to have a car with out its value being included in his salary for the purposes of Schedule E. Unfortunately the House of Lords in their decision reported in the Times on the 13th March over-ruled the Court of Appeal. (Heaton v. Bell, The Times, 13th March 1969). 113 SCHEDULE E-TYPE In the Gazette for July 1969