Taking cover

To the surprise of many clients, professional indemnity insurance is by no means universal among India’s law firms

Alfred Romann reports

When B Ramalinga Raju, the founder and former chairman of Satyam, confessed to cooking the books at his company, he unwittingly exposed low standards in India’s accountancy profession. For not only had Satyam’s management been falsifying its accounts over a number of years, but the company’s auditors, Price Waterhouse – the Indian affiliate of PricewaterhouseCoopers (PwC) – had not picked up on it.

PwC now faces several lawsuits, including a class action suit in the US, which could cost it hundreds of millions of dollars. But fortunately for the accountancy firm, it has significant professional indemnity (PI) insurance which is likely to cover the bulk of any award against it.

The Satyam debacle has prompted a debate over levels of accountability in the country’s accountancy profession, even though the majority of accountancy firms are covered by PI insurance. The legal profession, however, is in a different position. Not only is it uncommon for Indian law firms to have any form of PI insurance, but it is almost unheard of – for now at least – for law firms to be sued by their clients.