CLC seeks approval for solicitor-style indemnity scheme

Print This Post

26 May 2016


Sheila Kumar

Kumar: two insurers have already signed agreement

The Council of Licensed Conveyancers (CLC) has announced its intention to apply to the Legal Services Board (LSB) to approve the introduction of a solicitor-style open market indemnity scheme.

However, the move – announced yesterday with the results of the council’s recent consultation – has triggered warnings that law firms may switch regulator from the Solicitors Regulation Authority (SRA) to the CLC for the wrong reasons.

Under the reforms, minimum terms and conditions for the indemnity scheme would be set out in a participating insurers’ agreement, including, for the first time, run-off cover for a period of six years.

The CLC said that, following discussions with insurers, a cap would be introduced limiting run-off cover to £2m in aggregate. If this was exceeded, applications would have to be made for grants from the Compensation Fund.

The CLC described the level of run-off cover as “prudent”, and said it was based on analysis of “past claims over many years”.

Launching the reforms earlier this month, CLC chief executive said the new scheme could “make a reality” of the theoretical freedom of law firms to switch regulator.

However, responding to the CLC’s consultation, the Legal Services Consumer Panel warned that if larger SRA firms switched to the CLC, “the figures used to assess the appropriateness of the proposed run-off cap may change” and there should be a review two years after the changes. The CLC said it has agreed to the review.

The panel also warned that approved regulators should work together to ensure that “gaps or loopholes in run-off coverage” did not result from mixed SRA firms, which offered services other than conveyancing and probate, switching to the CLC.

The CLC said it had “already identified this risk and will work with the SRA to agree appropriate mitigating steps”.

The Council of Mortgage Lenders (CML) “asked for assurance of the measures which the CLC will have in place to identify firms who may be looking to move regulators due to poor performance/monitoring or disciplinary issues with their former regulator”.

The CLC said no licence would be issued to a practice “until evidence of insurance is produced and until the CLC is satisfied with the standards of that practice”.

The Law Society warned of a “significant risk” in SRA firms wishing to close switching to CLC regulation in order to avoid the SRA run-off premium.

The CLC replied that it had identified this risk, as had insurers, and “separate processes are in place to identify those practices seeking to transfer for this purpose”.

Ms Kumar said two current insurers of CLC firms had already signed up to the participating insurers agreement.

“These changes meet our objectives of enhancing consumer protection, supporting innovation and growth of businesses in the legal sector, and reducing the regulatory compliance burden and we hope that the Legal Services Board will confirm their approval in time for CLC practices to benefit from them in this summer’s PII renewal round.”

Tags: , ,



Leave a comment

* Denotes required field

All comments will be moderated before posting. Please see our Terms and Conditions

Legal Futures Blog

Rating lawyers by their wins and losses – a good idea?

Robert Ambrogi

Lawyers will give you any number of reasons why their win-loss rates in court are not accurate reflections of their legal skills. Yet a growing number of companies are evaluating lawyers by this standard – compiling and analysing lawyers’ litigation track records to help consumers and businesses make more-informed hiring decisions. The shortcomings of evaluating lawyers by win rates are many. Not least of them is that so few cases ever make it to a win or loss. Of equal concern is that, in the nuances of law practice, it is not always obvious what constitutes a win or a loss.

February 22nd, 2017