The Solicitors Regulation Authority (SRA) has warned law firms without PI insurance for 2013-14 that they could be breaching regulations and may face enforcement action.
New rules introduced by the SRA closed the Assigned Risks Pool, which had previously provided insurance to law firms without PI cover, in October 2013. It was replaced with an Extended Policy Period (EPP) which is designed to allow firms to have 90 days to secure insurance cover or cease trading. It is split into two sections; the first 30 days is called the Extended Indemnity Period (EIP) when firms can continue trading as normal – followed by a 60 day Cessation Period when firms can only act on existing instructions while working towards closing their business at the end of the period.
By 6 November 2013, when the Cessation Period had already commenced, a significant number of firms without insurance had failed to advise the SRA of their intentions. In a press release, Agnieszka Scott, the SRA’s director for policy and financial protection, said: ‘So far we have shown a lot of understanding towards firms that have been late in letting us know their insurance position, but now, more than a month later, there really is no excuse. It is a requirement in the regulations that firms inform us of their situation and from now on, we will have to think about appropriate enforcement action for those that fail to contact us.”
The Cessation Period has now ended, and the SRA has published a list of over 100 firms which have closed. Any firms without insurance and which have not informed the SRA are likely to face significant consequences.
Russell Lane, Managing Director of Brunel Professional Risks, believes more can be done to make the PI insurance market more competitive for solicitors firms and avoid this situation in the future. “We have worked very hard to secure competitive insurance cover for our clients and successfully helped struggling law firms to obtain PI cover at the latest renewal. Sadly however there are other firms whose brokers have not been so successful. I believe it is now time for a rethink of the breadth of cover provided by solicitors’ PI insurance, which is significantly wider than that offered to any other profession. Whilst the level of protection to firms and their clients is laudable, the aggregate of claims being paid has driven all but a handful of insurers from the Solicitors PI market. Many of those that remain do not provide cover for smaller firms – and yet these make up some 80{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} of the firms in the UK.”
He explained, “By making simple changes, such as allowing insurers to void cover for non-payment of premiums or non-disclosure of relevant information, the insurance market would become far more viable – allowing solicitors firms to secure high quality PI insurance cover far more easily and cost effectively.”
