Duncan Lewis

Legal Aid

Lawyers London

Conveyancing and indemnity insurance

Date: (18 December 2012)    |    

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There are different types of insurance policies covering different types of risks but they are basically running on the same principle. Legal indemnity insurance is one such policy which arises when one individual takes on the obligation to pay for any loss or damage that has been or might arise due to an act or abstention of an act by another individual. It generally protects against liability, loss or damage.
Legal indemnity insurance is used more and more in conveyancing as a way of getting a transaction to the point of completion more quickly than would be possible if whatever defect is being insured against were actually resolved.
Those involved with property ownership investment and development are normally required to have legal indemnity insurance in place. It would insure against specific legal and conveyancing problems which could arise when purchasing, developing or mortgaging land or property. It could include conditional contracts, defective titles, access and planning problems to name a few.
There are demands for other areas of legal indemnity other than standard range of covers such as policies covering judicial review, rights of light and town or village green, along with those required on a pre-planning basis. A client who is not insured to cover a problem of title or conveyance, the property transaction could be significantly delayed. Further a transaction or development cannot proceed where no cover is in place.
Traditionally, conveyancing solicitors have been responsible for securing legal indemnity insurance on their customer’s behalf. However with the number of property transactions in decline and pressure on legal practices to save time and money, many conveyancing solicitors are increasingly turning to insurance brokers to arrange this type of insurance.
The indemnity policy is just like any other policy where a premium is paid in return for cover by the insurer against a given risk still there are some vital differences and a purchaser should be aware of the implications before accepting insurance which unfortunately is not very often fully explained by conveyancers and could leave clients feeling confused and at a greater risk.
Legal indemnity insurance is a specific type of insurance policy used in conveyancing transactions where there is some sort of legal defect such as a missing landlord, lack of planning permission or building regulations approval, a lack of easement right etc. which cannot be quickly resolved or in some cases un-rectifiable and which could if not cause actual loss would have potential of a significant loss.
Unlike other types of policy, for which regular premiums have to be paid and which need to be renewed periodically (usually annually), only one premium will need to paid and the cover will last forever in most cases. Where a mortgage is being used for the purchase the lender will generally be insured jointly with the purchaser.
A lawful action which causes loss to an insured in respect of a defect like a legal expenditure incurred due to defending a lawful action would be covered under the indemnity policy.