Practice Management

Risk Alert Bulletin - December 2018

The Attorneys Insurance Indemnity Fund NPC (the AIIF) Master Policy has been amended. The amended policy has been included in this special policy update edition of the Bulletin.

Historically, the AIIF Master Policy extended cover to practitioners who were in possession of, or obliged to apply for, a Fidelity Fund certificate. This has now changed. The amended policy came into effect on 1 December 2018.

The effect of the amendments is that only practitioners who are in possession of a valid Fidelity Fund certificate will be afforded indemnity if they had such a certificate on the date of the cause of action (the act, error or omission) giving rise to the claim. The aims of the amendment are to align the policy with the provisions of the Legal Practice Act 28 of 2014 (the Act), the general principles of insurance and the legal obligations of the AIIF and insured practitioners.

S 84(1) of the Act provides that every attorney and every advocate referred to in s 34(2)(b) who practices or is deemed to practice -

  1. for his or her own account either alone or in a partnership; or
  2. as a director of a practice which is a juristic entity, must be in possession of a Fidelity Fund certificate.

Rendering legal services in contravention of s84(1) is an offence (see s94(8)) and a person convicted of contravening that section of the Act is liable:

  1. to pay a fine or to imprisonment for a period of up to two years (or both such imprisonment and payment of a fine);
  2. to be struck off the Roll of Legal Practitioners; and
  3. is not entitle to any fee, reward or reimbursement in respect of legal services rendered.

The AIIF will not provide indemnity in respect of legal services rendered in violation of the Act as this would amount to the indemnification of illegal action carried out intentionally - insurance cover cannot be provided in respect of an intentional unlawful act.

As a registered short-term insurance company, the AIIF must comply with the Financial Sector Regulatory Act 9 of 2017 (the Financial Sector Regulatory Act). The objects of the Financial Sector Regulatory Act include the prevention of financial crime (see s 7(e)).

The court in NW Civil Contractors CC v Anton Ramaano Inc and Another (993/2016) [2018] ZALMPTHC 1 (14 May 2018) found that the actions of an attorney who, in violation of s 41 of the Attorneys Act 53 of 1979 (the predecessor to s 84 of the Act), practised without a Fidelity Fund certificate were void ab initio.

The amendments to the Master Policy have been effected in the course of this insurance year in order to align the indemnity provided with the legal obligations of the company. Regard must be had to the following clauses in the policy which have been amended:

  • XIV (the definition of Fidelity Fund certificate);
  • XX (the definition of Legal Services);
  • 5 and 6 (who is insured); and
  • 16 (t) (the exclusion of claims arising from legal services carried out on violation of the Act).

Practitioners liable to practice with Fidelity Fund certificates must thus ensure that they timeously apply for such certificates in order to avoid contravening the Act and also to ensure that the legal services they provide fall within the ambit of the AIIF Master Policy.

We have also included a copy of the risk management self-assessment questionnaire which practices must complete annually (clauses XXIV and 23 of the Master Policy). It is an opportune time to complete the risk management self-assessment at the same time that the application for the Fidelity Fund certificate is made.

The annual completion of this questionnaire is compulsory, both in terms of the Master Policy (see clauses XXIV and 23) and the South African Legal Practice Council Rules (the Rules) made under the Act. The AIIF will not provide indemnity when you have a claim, until you provide it with a copy of a questionnaire which has been completed in the applicable year. For attorneys, point 15 of the application for a Fidelity Fund certificate form (schedule 7A of the Rules) provides that this form must be completed. Advocates rendering legal services in terms of section 34(2)(b) of the Act must also complete this questionnaire annually (see point 13 of the application for a Fidelity Fund certificate form for advocates (schedule 7B of the Rules)). You will not be issued with a Fidelity Fund certificate if you have not complied with this requirement. Any reference to a firm in the form includes advocates referred to in section 34(2)(b) of the Act. The aim of the form is to collect risk management and underwriting information. The form must be completed even if your firm does not have any claims pending.

Thomas Harban
General Manager, AIIF
Telephone: (012) 622 3928

Risk Alert Bulletin December 2018

Reader Comments:

Marius de Jager 01/02/2019:

I retired as Director of an incorporated attorney company. I have been appointed as a consultant, basically running the same practice as before retirement. It would seem that I do not need a F F C. Will my actions still be covered by the AIIF master policy?

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