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Insurance & Risk Management

Every business faces risks. Managing risks is important not only for reducing the likelihood of financial loss, but also for minimising the cost and incidence of claims, thereby keeping insurance premiums as low as possible.

Insurance, as a form of risk management, ultimately safeguards the vital financial interests of the practice and protects its major assets, such as premises, employees and clients.

This section provides information on:

Insurance – Choosing the Right Policy

Selecting the appropriate insurance policy for your practice requires the following steps:

  • Consider what type insurance is appropriate.
  • Learn the extent of the coverage.
  • Complete the proposal form in detail.
  • Get comparable policy quotes (costs, discounts, no-claim bonuses).
  • Seek written responses to specific questions about coverage.
  • Ensure correct valuation of assets for coverage.
  • Confirm start and end dates of policy.
  • Confirm claims procedure.
  • Check whether policy renewal automatically increases asset values.

Types of Insurance

Legal practices and partners, directors, etc. have a range of insurance policies available to them, with different packages to suit the type and size of the practice. Insurance brokers provide further advice on ways of altering the provisions of a policy to satisfy specific practice needs.

Types of insurance include:

  • Building Insurance: property damage protection for practices with their own premises
  • Loss-of-Profit Insurance: protection of profit lost through damage to property caused by fire or other insurable acts (includes coverage of staff wages and sometimes costs of alternative premises)
  • Key Person Insurance: funding for the employment and training of a replacement employee or protection against the loss of new and existing business due to the loss of a key employee through illness or death
  • Personal Accident and Illness Insurance: same protection as provided through personal Workplace Injury Insurance
  • Life Insurance: financial security for the family of the insured deceased
  • Trauma Insurance: financial security for the family of a person who suffers or is diagnosed with serious health trauma
  • Public Liability Insurance: protection against claims from third parties, such as clients, who may suffer an accident while on the premises of the practice
  • Group Insurance: range of insurance policies covering a group of people such as employees
  • Trade Debtor Insurance: protection against bad debts (up to 90 per cent coverage)
  • Directors and Officers Insurance: for legal practitioner directors.

Professional Indemnity Insurance

Under the Legal Profession Uniform Law Application Act 2014 (Vic), professional indemnity insurance is compulsory for all practitioners and must cover the civil liability of the legal practice to the extent of the limit prescribed by the legislation. It must also cover each person who is, or was a principal or employee of the legal practice in connection with the administration of trusts.    

Exemptions apply for individual practices or a class of legal practices that meet certain conditions established by the Victorian Legal Services Board Commissioner(VLSBC).

Contact

Legal Practitioners' Liability Committee
T: 03 9672 3800
W: www.lplc.com.au

Top-Up Insurance

In addition to the compulsory, primary level cover provided by the LPLC, a practice may choose to obtain "top-up" cover for extra protection. This decision is usually affected by the type of work the practice is involved in, the claims experience of other firms as well as its own, recent trends in court decisions and the cost of top-up cover.

Risk Management

Insurance is part of a broader risk management plan that analyses and addresses possible areas of risk within a business.

When developing a risk management plan, it is important to consider where the risks lie. This can be done by undertaking a comprehensive risk assessment process, consulting employees with comprehensive knowledge of the workplace, work processes and financial decision making.

Risks should be prioritised in order of probability of occurrence and procedures developed for dealing with each one documented. There should also be a systematic review of risks.

Risk management considerations include:

  • financial risk, regulatory risk, operational risk, strategic risk and client risk
  • storage of hard copy and electronic files, accounting records and valuable documents
  • duties of employees in case of sudden loss of a key employee
  • sources of possible disruption to work
  • safety of sensitive information
  • relocation sites if current office is threatened
  • death or retirement of key people who have knowledge of critical information
  • HR and occupational health and safety risks related to staff conditions and performance.

The Legal Practitioners' Liability Committee provides assistance with claims prevention and provides risk management advice to practices and practitioners in relation to professional risk.

A number of useful publications and materials appear on the LPLC website.