Exclusive: SRA axes insurers’ obligation to cover solicitors’ costs in disciplinary cases

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By Legal Futures

1 July 2010

Hudson: Law Society unhappy with SRA's actions

Professional indemnity insurers will no longer have to pay the defence costs of solicitors facing disciplinary proceedings, bolstering the case for a legal defence union, Legal Futures can reveal.

The Solicitors Regulation Authority (SRA) made the change to the minimum terms and conditions of insurance – which will take effect from 1 October 2010 – with minimal consultation, and has been criticised by the Law Society.

Mark Humphries, who chairs the SRA’s financial protection committee, told Legal Futures that “when we were asked by the qualifying insurers to review the position, we couldn’t persuade ourselves that this was an area where mandatory insurance could be justified in the interests of consumers”. But it would be open to solicitors to negotiate with their insurers to have such cover included, he added.

Mr Humphries said that where there is a “trivial” change in the wider context of the minimum terms, “we have to take a view on whether we have to go out to consultation”.

However, Law Society chief executive Des Hudson told Legal Futures that “we are very unhappy” with the “concession” the SRA has made to the insurers and the lack of consultation. He insisted that the usual consultation obligations should apply “even if the proposed change doesn’t impact on public protection”. In any case, he said the minimum terms “should properly go beyond the issue of public protection” and include provisions such as this.

Duncan Finlyson, manager of the Lawyers Defence Group, a Legal Futures Associate, described the move as “the final nail in their coffin” for some solicitors. “Often the existence of the cover is a solicitor’s only chance of defending proceedings or preventing themselves from ceasing to be able to practice,” he said.

He continued: “The profession is going to need to think seriously about other ways of providing cover – for example, a full defence union of a similar kind to that provided by the Medical Defence Union.”

Andrew Lockley, head of public law at Legal Futures Associate Irwin Mitchell, said professional regulation specialists will be “surprised” that this decision – “which goes against the trend across other professions” – has happened without consultation. He pointed out that there is often a thin line between negligence claims, the defence costs of which will still be covered, and disciplinary issues.

Though the move may increase pressure for the creation of a legal defence union, Mr Lockley said that unless defence insurance were universal, the problem would be adverse selection – “it would be bound to attract those who are high risk,” he explained.

Mr Hudson said that the Law Society has been looking at defence union options “for some time and will continue to do so”.

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