Professional Liability (Hansard, 31 October 1989)

§ Mr. Redwood

The report of the three study teams on professional liability under the overall chairmanship of Professor Andrew Likierman is published today. I have arranged for copies to be placed in the Library.

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The Government set up these studies last year because of the concern expressed by many professionals about the extent of claims for professional negligence and the cost and availability of professional indemnity insurance. This is an area in which there was a wealth of anecdote, but little hard fact. The studies acknowledge that there are difficulties in obtaining comprehensive information, but have none the less brought together much useful material.

The report finds that the same underlying changes in insurance and law have affected all three groups of professions, but that the effects of the changes on these groups have been different. The study teams have therefore recommended a different package of proposals for each profession.

We accept the broad conclusions of the report, that professionals have been faced with an increasing exposure to negligence claims, and that the cyclical nature of the insurance market means that at times costs of insurance increase sharply. The report finds that so far the changing position of professionals is having only limited effects on the quality or cost of the service they are providing to consumers. We are conscious of the need to balance the potential adverse effects on consumers against the right of consumers who are victims of negligence to recover damages to the extent possible.

The construction professionals and the surveyors study teams recommend steps which professionals, their institutions and the associations representing all parties could take to improve standards, practice and collaboration. The Government welcome these recommendations.

Several of the recommendations addressed to Government are very wide-ranging, including proposals for reform relating to joint and several liability, legal aid and time limitation periods for claims. It is recommended for example that the Law Commission should be asked to consider the case for changes in the law of joint and several liability in commercial cases. While the Government recognise the strongly held feelings that the current arrangements in these areas can in some circumstances operate unfairly against the professions, the changes suggested would have important effects well beyond the immediate context of professional liability. They will require fuller consideration before the Government can form a view.

Other proposals will be looked at as legislative opportunities become available. The current Companies Bill has already provided an opportunity to pursue two of the recommendations of the auditors study team. We accepted the proposal that the law on directors' insurance should be clarified so that a company can reimburse a director for his liability insurance. We decided against the proposal that an auditor should be able to limit his liability by agreement with the company. Consultation revealed that non-auditors were generally opposed to the idea because it could limit legal redress in the rare cases of poor audits. Some recommendations, however, can already be seen to raise practical difficulties which are such as to preclude further investigation.

My right hon. and noble Friend the Lord Chancellor, my right hon. Friends the Secretaries of State for the Environment and for Trade and Industry and other colleagues as appropriate will be considering the outstanding points.

We are very grateful to Professor Likierman, to the chairmen of the three study teams, William Morrison, Professor Donald Bishop and Ian Oddy, and to the study 108W team members, all of whom have voluntarily put so much work into this review. We are also grateful to all those who provided evidence for the studies.