Practice Management

Risk Alert Bulletin - June 2020

Risk Management Column - Amendments to the LPIIF Policies

The annual renewal of the Legal Practitioners Indemnity Insurance Fund NPC (the LPIIF) policies will take place on 1 July 2020. The new policies will be published on that date and will also be uploaded onto the LPIIF website (www.lpiif.co.za).

The LPIIF team has, once again, carefully considered the wording of both the professional indemnity Master Policy and the Executor Bond Policy. All insured legal practitioners must study the policy wording carefully.

The Master Policy
The current Master Policy wording can be accessed at www.lpiif. co.za. The changes to the Master Policy do not introduce any new exclusions and are aimed at improving the articulation of the affected clauses and removing any potential ambiguity.

Changes have been made to the following clauses:

  • XIII – clarification that this definition refers to the excess.

  • XXIV – only legal practices conducted as a sole practitioner, a partnership of practitioners, an incorporated legal practice as referred to in section 37 (4) of the Legal Practice Act 28 of 2014 or by an advocate referred to in section 34 (2) (b) of the Act will, subject to the terms of the Master Policy, be covered.

  • 6 – clarification of the existing position that indemnity is granted to the legal practice that is, the firm –and not to the individual practitioners in the firm separately.

  • 16 (e) – the definition of “Investment Advice” has been added in order to clarify the meaning of the existing exclusion. The change to this clause reads:

‘For purposes of this clause, Investment Advice means any recommendation, guidance or proposal of a financial nature furnished to any client or group of clients -

(a) in respect of the purchase of any financial product, or

(b) in respect of the investment in any financial product, or

(c) the engagement of any financial services provider.’


  • 16 (f) – the reference to section 78 (2A) of the repealed Attorneys Act 53 of 1979 has been removed.

  • 16 (m) – the change in the wording clarifies the scenarios where the exclusion applies being (i) the insured acts purely as a conduit for the funds with no underlying mandate to provide legal services, and (ii) where, after the completion of the mandate, the insured takes further action which has no impact on the mandate to provide legal services, which action the client can perform successfully without the involvement of a legal practitioner, and such action amounts to the taking of further and unnecessary risks by the insured.

  • 16 (o) – tidying up the wording in order to clarify that the exclusion applies to payments made by the insured into an incorrect account(s).

  • 30 – the word ‘Notice’ has been replaced with ‘Notification’.

The annual limits of indemnity (amount of cover) and the applicable excesses remain unchanged.

Please direct any queries in respect of the Master Policy to the LPIIF’s Claims Executive, Joseph Kunene, at sithembi. kunene@LPIIF.co.za or telephone (012) 622 3917.

The Executor Bond Policy
The changes to the Executor Bond Policy are as follows: • References to ‘attorney’ have been replaced with ‘legal practitioner’.

  •  References to the old law society provincial jurisdictions have been updated to refer to the Legal Practice Council (LPC).

  • The policy clarifies the existing position that bonds of security will only be issued to executors. An applicant seeking appointment in other capacity, including as a Master’s representative in terms of section 18 (3) of the Administration of Estates Act 66 of 1965, will not be granted a bond of security (clause 2.1).

  • The day-to-day administration of the estate must be done by the legal practice in which the executor practices.

  • The LPIIF has the right to refuse to issue a bond of security to an applicant who has breached any term of the policy, whether in respect of the current application or any previously granted bond of security (clause 2.10).

  • Clauses 3.3.2.1 and 3.3.2.3 have been amended to give the LPIIF the rights (i) to refuse to issue further bonds to an applicant who fails to provide a copy of the letters of executorship within 30 days of such letters being issued, and (ii) giving the LPIIF the right to apply to the Master of the High Court for the removal of the executor for a failure to comply with the obligations in this clause.

  • Clause 3.3.2.4 creates an obligation on the executor to apply to the Master for the closure of the bond within 30 days after the liquidation and distribution account has been approved and the executor has accounted to the Master.

  • In terms of clause 3.9, the LPIIF will have the right to report the executor to the LPC at any stage where dishonesty is detected.

  • Practitioners linked to more than one firm will have bonds issued to them in the name of only one firm (clause 4.2). This is a risk management measure aimed at ensuring (i) that the administration of the estates which are the subject of bonds issued to a particular executor are all administered in one firm, and (ii) preventing attempts by certain practitioners to breach the limit of R20 million per firm.

It will be appreciated that these amendments are aimed at improving the management of the risk associated with this line of business, addressing the long-tail nature of this business and also to align the obligations of the executors with the provisions of the Administration of Estates Act. The aim is also to encourage the prudent management of this area of practice. The value of active bonds issued by the LPIIF is currently approximately R5 billion with some bonds having been issued in as early as 2002 and the executors not properly reporting to the LPIIF on the progress made in the administration of the underlying estates. The risk cannot be left to exist in perpetuity. Claims in this area have also eminated mainly from dishonesty on the part of the executors or their staff.

Any queries in respect of the amendments to the Executor Bond Policy can be addressed to Zodwa Mbatha, the Executor Bond Executive, at zodwa. mbatha@lpiif.co.za or telephone number (012) 622 3925.

Keep a look out for the new policies in the next edition of the Bulletin.

Thomas Harban
General Manager,
Email: thomas.harban@lpiif.co.za
Telephone: (012) 622 3928

Risk Alert Bulletin June 2020

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