Professional advisers, including online accountants, have witnessed a massive rise in the number of negligence claims filed against them since the start of the recession.
Research by Syscap showed a rise of 125% in the number of High Court negligence cases launched between 2008 and 2009. In 2008, for example, there were 80 high court negligence claims against law firms. By 2009, the number had leapt to 210.
No claims were brought against accountants in either 2007 or 2008 according to law firm Reynolds Porter Chamberlain. However, last year accountants faced 13 large High Court negligence suits including claims that auditors failed to spot a fraud or negligently overvalued company assets. Deloitte Touché and PwC were among the well known accountancy firms cited for negligence in 2009.
Claims against professional advisers have now reached the highest level for 11 years and as a direct result, some professional firms are having to borrow money to pay increased professional indemnity insurance rates. PI insurance is a compulsory requirement for lawyers and accountants and it pays for the cost of defending negligence claims and for damages.
Syscap also claims that the steep increase has been triggered by lenders and investors trying to recover falling asset values by suing their advisers. They hope to win damages from the professional advisers they claim gave negligent advice regarding transactions that involved those assets.
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