Accountants facing liability threat

Law Lords refused leave of appeal following a Court of Appeal verdict earlier this year which ruled claims can be brought against employees who give advice on behalf of their employers.

According to Peter Maguire, a partner and insurance specialist at law firm Cameron McKenna, the decision has severe consequences for accountants who work in small firms. He reckons there are lots of smaller firms which have inadequate professional indemnity cover and are, therefore, most susceptible.

‘The chances are that big firms have plenty of cover. And even if there is not enough, why go after an employee when you could go after the partner?’ he told

‘History shows that, when losses are suffered, many clients will explore all available avenues in seeking to recover those losses from their advisers,’ he added.

The case involved John Babb, a chartered surveyor from Plymouth, who was sued over a mortgage valuation he provided in 1992 on behalf of Clive Walker Associates, which went out of business in 1994. The claim against Babb was not brought until 1999.

The impact could be felt outside accountancy and surveying too, with financial advisers, insurance brokers and IT consultants all affected. Maguire warned that professionals will be more susceptible when:

  • their company has ceased trading and has no run-off cover
  • is under-insured and cannot meet the full claim
  • is unable to pay the excess due under the policy

And it is thought the worsening economic climate could have dire consequences too.

‘Corporate failures are now at their highest level for six years and this, coupled with the highly unsatisfactory state of the law on limitation, only serves to heighten the vulnerability of such individual,’ said Maguire.


Accountants in personal liability scare

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