Recession set to fuel legal action against accountants, insurance broker warns

Litigation against accountants is likely to increase as economic conditions deteriorate, a leading insurance broker has warned.

Any increase in legal claims against accountants could push up Professional Indemnity insurance premiums paid by accountancy firms, Marsh added.

Troy Russell, a vice president in Marsh’s financial and professional practice, said: 'In 2008, the PI market for accountants and auditors continued to soften and many firms received premium rate reductions.'

'However, insurers are already taking a tougher position on rates for other professions, such as the legal sector, where the market is already showing signs of turning. It is likely that, due to current economic conditions, this trend will also affect accountants and auditors when they come to renew their insurance policies.'
Key legal and financial risks faced by accountants include agreeing a fair valuation of a client's assets, companies making legal claims when auditors fail to uncover fraud within their company; and clients trying to pay a reduced fee, according to Marsh.