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Rising Number of Law Firms Fail to Secure Indemnity Cover

Posted by Kings Court Trust | 24-Oct-2013 09:00:00

All legal firms in England and Wales are required to have professional indemnity insurance, covering civil liability claims such as professional negligence. Existing firms had to renew their insurance by the start of the indemnity period on 1 October, after which the single renewal date was abolished.

The Solicitors Regulation Authority (SRA) has reported that, as of 21 October, a total of 219 legal firms had entered the new extended indemnity period (EIP) that gives them 30 days to secure backdated insurance coverage in order to continue operating.

This number is 18% higher than the 185 law firms that applied to the SRA for the EIP within the five-day grace period after the 1 October deadline for securing indemnity insurance. 28 of the 219 firms have since then succeeded in securing indemnity coverage.

The regulator also noted that sector firms had been slow to take action with regard to the deadline for practising certificate renewals, which comes at the end of the 30-day EIP. According to a spokesman, the SRA is still considering whether to take action against those that are trailing behind with their response to this deadline. Still, if it decides to act on this, the SRA will make sure the action is proportionate and takes into account all circumstances in any individual case.

Those firms which fail to find insurance coverage by the end of the month will enter a 60-day period of cessation, which means they will only be allowed to work on existing cases; no new instructions will be allowed. If no indemnity coverage is secured by the end of that 60-day period, the firms will be forced to suspend all activity and their current insurer will have to provide them with the obligatory six-year run-off coverage, whose starting date will be set as 1 October.

The Chief Executive of the Law Society, Des Hudson, commented that the latest regulation discriminates between the largest sector players, which would have hardly any difficulty finding indemnity coverage, and smaller law practices, which can find it hard to find an insurance option that they can afford or any at all.

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Author: Kings Court Trust

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Topics: Industry News, Regulation