Law firms enter a brave new world

"With stout hearts, and with enthusiasm for the contest, let us go forward to victory." General Montgomery, 5 June 1944.

Stating the obvious, it has been a pretty tumultuous start to 2013 for many in the legal profession – assuming, as we all hope, profession remains the correct  industry noun.

Law firm managing partners report to us two major areas of activity at the moment. Firstly, steadying the ship to make sure it remains afloat with the right crew and a profitable cargo on board and, secondly, scanning the radar screen for good commercial opportunities.

The analogy will rest here, for all our sakes.

The main work we are being  asked to assist law firms with right now falls into six broad categories:

1. Reviewing or drafting agreements with service providers to ensure they are commercially effective and regulatorily compliant.
2. Re-structuring existing business models and commercial ventures.
3. Structuring new business models and commercial ventures.
4. Acquiring, merging or selling firms and books of business.
5. Providing regulatory advice on new business development initiatives.
6. Developing third party litigation funding solutions, for commercial and private clients.

It's been said before but it's worth repeating - law firm managing partners who make the right strategic judgment calls will be the winners going forward and it is down to their COLPs, COFAs and advisers to help them structure and  implement their plans on a fully informed and compliant basis.

To emphasise this point, Samantha Barrass, SRA Executive Director, said at a recent industry conference: "It is important to be clear that we will take appropriate enforcement action against those firms who decide to take a 'wait and see' approach and make no effort to change non-compliant practices. It is individual firms' responsibility to review their current business models and take responsibility for making sure they are compliant."

O’Connors LLP is a law firm that advises other law firms on structural and regulatory matters and comprises corporate, commercial, insurance and regulatory lawyers who are highly experienced in working for lawyers, alongside other advisers. Instructing another law firm and acting on its advice gives a prima facie defence (or at least mitigation) in the event of a breach of the SRA rules together with the benefit of solicitor/client legal privilege.

O'Connors LLP is currently offering law firms a fixed price consultation with our senior team to review strategic options from a commercial and regulatory perspective. For more information please contact Nigel Wallis or Pamela Rafiq at:

O’Connors LLP
The Plaza
100 Old Hall Street
Liverpool
L3 9QJ

T: 0151 906 1000
W: www.oconnorsllp.co.uk/support-for-law-firms

Law firms face their toughest challenge

If the Government gets its way, as is likely, in just over three months’ time, law firms all over the country will have their business models tipped upside down and hundreds (possibly thousands) of them will be forced to adopt new ways of attracting business and charging for their work.

Whether you agree with the proposed changes or not is no longer the point.

Law firm managing partners who make the right strategic judgment calls will be the heroes of the hour.

Newly appointed COLPs and COFAs will be in the deep end without water wings and with no lifeguard on duty.

So this is a time for cool heads and, dare we say, a return to basic principles.

All law firms are in business with a view to profit and so it is self-evident that any new commercial structures put in place work from a financial perspective. The accountants we work with who advise law firms tell us they have never been busier producing financial forecast after financial forecast based on a multitude of ‘what ifs’ – yes, they are making hay while the sun shines but, importantly, they are helping lawyers plot a profitable future.

It is against this financial backdrop that we repeat our words to the wise in our October issue.

Think extremely carefully about your regulatory position before you commit to any new structure.

O’Connors LLP is a law firm that advises other law firms on structural and regulatory matters and comprises corporate, commercial, insurance and regulatory lawyers who are highly experienced in working for lawyers, alongside other advisers. Instructing another law firm and acting on its advice gives a prima facie defence (or at least mitigation) in the event of a breach of the SRA rules together with the benefit of solicitor/client legal privilege.

Projects we are currently working on include:

• Advice on structuring a law firm’s relationship with a business referrer;
• Reviewing and commenting on an ABS application;
• A law firm merger;
• A law firm acquisition of a number of CMCs;
• The sale of a law firm to a CMC;
• Advice on publicity and marketing arrangements;
• Drafting an SRA compliance plan;
• Advising on the separate business rules;
• Structuring a law firm’s funding arrangements;
• Advice on agreements with branded marketing collectives;
• Establishing a third party litigation fund;
• Setting up a divorce funding scheme;
• Structuring commercial arrangements with an ATE insurance provider;
• Conducting a compliance review of client facing documentation;
• Various SRA enquiries and advice on notifications.

We are currently offering law firms a 3 hour fixed price consultation with our senior team to review strategic options from a commercial and regulatory perspective.

For more information or to book a consultation, please contact Nigel Wallis or Pamela Rafiq at O’Connors LLP, The Plaza, 100 Old Hall Street, Liverpool L3 9QJ or call 0151 906 1000. See our full range of services for law firms at www.oconnorsllp.co.uk/support-for-law-firms

Does your Board take insurance seriously enough?

It is a sad fact that few companies survive a major loss, whether insured or un-insured.

Here are five insurance-related corporate governance actions that your Board should take to give your company the best possible chance of doing so:

1. Instigate an internal assessment of the financial impact on your company of suffering a major loss in circumstances where your insurer delays or refuses your claim - and put in place contingency plans. 
2. Ensure that all your key reports properly understand your company’s legal obligations to disclose material facts to your insurers and the consequences of failing to do so – and create a mechanism for capturing and notifying them.
3. Ensure that all your operational managers are aware of relevant conditions and warranties in your insurance policies – and create a mechanism for maintaining compliance.
4. Insist that a Board member reviews all materials used to place the company’s insurance programme – and formally approves them.
5. Require the company’s placing broker to conduct loss scenario testing of the proposed insurance policies prior to placement - and use a specialist insurance lawyer to assist in negotiating policy amendments to cover off potential gaps in policy terms.

Insurance for investor confidence

Having the right risk retention and risk transfer strategy in place is critical to the security of a company's balance sheet. After all, very few businesses survive a major uninsured loss. Investors know this and the corporate analysts who advise them are paying growing attention to the quality of a company's insurers and the service providers who place and manage its program. Service providers typically include insurance brokers, third party claims administrators, captive managers, pension trustees and insurance consultants. 

Increasingly, large insurance buyers are turning to independent insurance specialists to assist with the creation of effective service provider relationships. This trend is being driven by corporate governance and a genuine desire to achieve best value for money and service delivery from such providers.

General procurement advisers focus on cost alone which is a very blunt instrument for such a balance sheet sensitive issue. A specialist insurance procurement adviser, on the other hand, can bring genuine technical and tactical thinking to help deliver the right outcome, typically covering:

Benchmarking - conducting off-market benchmarking of service delivery and pricing (for organisations who need to stress test service provision for corporate governance purposes without open-market tendering);

Tendering - managing open-market competitive tenders (for those obligated or wishing to conduct a competitive procurement of services); and

Contracting - handling the variation, approval or drafting of insurance related service agreements (to ensure all agreed and necessary terms are properly codified in a binding contract).

O'Connors LLP has launched a service specifically aimed at large insurance buyers keen to achieve best practice in this area - details can be found at http://www.service-provider-reviews.co.uk/

A fresh approach to disputed insurance claims

Are your company's insurers disputing what you believe to be a legitimate insurance claim? Do you fear years of protracted litigation and damage to your company's reputation and profile with the insurance markets? Are you frustrated that you don't seem to be getting the robust advice you feel you deserve from your advisers?

You are not alone.

Before you rush to appoint litigation lawyers to threaten court proceedings, a more constructive approach might be to ask a non-contentious commercial insurance lawyer to conduct a confidential and objective review of your claim and policy wordings and provide a strategic view of the merits of your case and the legal and tactical arguments to put to your insurers - usually via your insurance brokers.

We are increasingly being asked to do this (by insureds and their brokers) and the results can be quite astonishing. Naturally, we put our success down to our charm and good looks but it is far more likely due to:

• Our ability to analyse claims from a 'Boardroom' perspective;
• The fact that our insurance lawyers have worked in or as advisers to insurers and know how they think and react;
• The lessons we have learnt from drafting policy wording for reinsurers, insurers, brokers, captives managers and companies;
• Our use of clear thinking and technical know-how to identify points that will encourage insurers to compromise;
• Our consideration of the various regulatory routes as a possible means of encouraging settlement;
• Our ability to offer advice with the benefit of legal privilege and properly cater for any weak points in a claim;
• Our ability to keep our advice brief, practical and (as far as any lawyer can) jargon and waffle-free.

It's a thought, anyway. Give us a call.

Legal contracts are the key to an effective insurance program

The protection afforded to a company’s balance sheet when it transfers a risks to an insurer is totally dependent on contract certainty with regard to:

• the contract it has with its insurer (insurance policy);
• the contract it has with its insurance broker (terms of business agreement); and
• the contracts it has with third party suppliers and customers (commercial agreements).

Insurance Policies - We come across many examples of insurance policies which do not respond to a claim because:

• the insuring clauses do not properly reflect the risks;
• they contain exclusions which the company was unaware of;
• they contain conditions which are unreasonable and should never have been accepted;
• they contain warranties the company has (unwittingly) failed to comply with; and
• the limit of indemnity is inadequate.

Terms of Business Agreement (TOBA) - We come across many examples of TOBAs which contain terms unduly favourable to the insurance broker because:

• the limit of liability does not reflect the true risk exposure of their client (i.e. offers limited recourse against the broker if things go wrong);
• they contain KPIs which are unworkable and/or unenforceable;
• they allow the broker to refuse to take responsibility for checking whether the policy wordings are fit for purpose, passing this to their client to check; and 
• the expiry of the TOBA coincides with the insurance program renewal date, making it very difficult to change broker.

Commercial Agreements - We come across many examples of commercial agreements which companies have entered into with third party suppliers and customers which contain indemnity and liability provisions that have not been cleared with their insurers and which:

• compromise insurers rights of subrogation and so potentially render the indemnity under the insurance policy ineffective;
• fail to secure the protection available under insurances purchased by other parties to such commercial agreements;
• fail adequately to impose insuring obligations on other parties when it is appropriate to do so.

We would be interested in hearing from any companies with experience of such issues with a view to sharing knowledge and solutions.

O'Connors LLP launches new Blog

Law firm O'Connors LLP has launched a new Blog to keep clients and contacts up to date with what is going on in the O'Connors world.

Watch this space!