Approximately two thirds of solicitors in England & Wales will be renewing their insurance on 1 October 2023 and there are many areas where we advise firms on the legal issues relating to coverage as well as preparing professional risk reports, independent of ties to any particular insurers or brokers.
We have published three articles which are on www.legalrisk.co.uk/publications: Solicitors’ Professional Indemnity Insurance Renewal 2023, Block notifications – the Solicitors’ PII renewal 2023, and Should solicitors change insurer?
Mergers and acquisitions: Successor practices are not the only risks
With a number of firms closing, some high profile, firms looking to acquire practices or teams will be addressing the risks of doing so. While there is a reasonably high degree of awareness of some of the implications of being a successor practice under the Solicitors Regulation Authority (SRA) Minimum Terms and Conditions (MTC), this does not always extend to some of the ancillary risks where potential exposure does not necessarily follow the successor practice rules and can, on occasions, dwarf the MTC risks.
We have advised several hundred firms on how to address these risks. It is not always a question of avoiding successor practice liability: sometimes it is the right thing to do, and the desired outcome can usually be engineered. However, the approach adopted has consequences in either case, whether immediately or some years further down the line. This can affect adequacy of cover in circumstances where claims may not be made for many years, for example trust cases where an interest may not have vested and time may not have commenced running. Those who have taken personal appointments as executors or trustees are particularly exposed to delayed claims, but there are risks in other areas too.
Coverage
We have advised many firms on coverage issues arising from rogue partner activity, particularly in the area of trusts and probate. Often, there are issues around liability to return fees charged by the rogue.
In Royal & Sun Alliance Insurance Ltd [2022] EWHC 2589 (Comm) Northern Irish solicitors succeeded in a claim for indemnity from insurers in respect of claims for reimbursement of fees received. The decision has now been upheld by the Court of Appeal. (Link: www.legalrisk.co.uk/News)
The potential liability of insurers in the case of restitutionary claims for fees which were not properly due was not decided; there are additional considerations under the MTC which do not apply to the Northern Ireland scheme forming the basis of that decision.
Review of compulsory insurance
A paper was produced for the Legal Services Board meeting on 18 July 2023 on Financial protection arrangements for consumers. It is concerning that the topic should keep raising its head when there have already been a number of reviews by the SRA. The latest paper does not inspire confidence in the process as it repeats the point that ‘there was considerable support for ongoing mandatory protection being at a lower level and cost, with consumers being offered top-up cover on an opt-out basis’. There is little prospect that consumers would understand the issues sufficiently to make an informed choice. Such an approach would be exposed to adverse selection and displays a lack of awareness of how insurance pricing and acceptance of risk works.
Reviews of compulsory schemes are not confined to the UK: we understand a review is pending in Ontario, and we have advised on others outside the UK.
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