Posted by Duncan Finlyson, Solicitor, Manager of Lawyers Defence Group, a Legal Futures Associate
Finlayson: firms may have problems finding insurance in the future
Tuesday’s announcement that professional indemnity insurer Quinn Insurance Limited – and its UK branch, Quinn Insurance Limited (UK) – has been placed into provisional administration has raised many concerns in the legal sector. Quinn covers some 2,911 solicitors firms, and last year wrote £23.7m worth of business – roughly 10% of the market, making it the fifth-largest provider of indemnity insurance to solicitors
So what does this announcement mean for those solicitors with Quinn and what are the implications for the market in general in the future?
In a statement issued on Tuesday, the SRA said: “Existing policyholders in the UK will continue to be covered, and that customers of the firm can continue to make claims in the normal way.” It added that firms should “take no action at present, until the situation is clearer”. The SRA stated that it “will contact all policyholders direct if action needs to be taken”.
Already, however, rival insurers are in talks with those brokers who have placed sizeable amounts of business with Quinn, whilst those who avoided Quinn in the past have been quick to claim the moral high ground.
It would appear that, if Quinn continues to be able to guarantee that claims can be handled in the normal way, then they may not have a problem. The mere fact that Quinn ceases to be authorised by the Law Society/SRA to write new business will not in itself invalidate existing policies. The big “however” is that if Quinn becomes insolvent, then rule 6.1 of the Solicitors Indemnity Insurance Rules 2009 come into play and leave solicitors in the position of needing to find alternative cover within four weeks of that insolvency or risk faling into the assigned risks pool (ARP). Worryingly, a good number, although by no means all, of the firms who went with Quinn are the ones who had problems obtaining cover in the market at the time of the last renewal.
It is in the longer term that many firms may find themselves with problems. Even if Quinn manages to weather this particular storm and remain an approved insurer, questions will inevitably be raised as to its ability to meet claims in the future and many solicitors may again find cover difficult, if not impossible, to find.
If firms are going to continue to be able to obtain PII cover, then they must take a close look at their structure, the kind of work they do, they people they employ, the size of their practice and the nature of their clients. Most importantly, they have got to address risks within the firm and take appropriate steps to minimise those risks as far as possible.
To an extent this is going to be thrust upon firms by the introduction of outcomes-focused regulation – but they need to go further than merely that which is required and go the extra mile. Easier said than done, especially with all of the other pressures which practice places upon them.
Moreover, all firms must take account of the costs not only of having insurance, but also of not getting it, or losing it. In particular firms should also be aware of the high cost of needing to obtain run-off cover when their practices close – cover which can cost 2.5-3.5 times their annual PII premium.
Duncan Finlyson is a solicitor with Richard Nelson Solicitors, manages the Lawyers Defence Group and is secretary to the Solicitors Assistance Scheme. Formerly managing director of LawNet and a policy adviser with the Solicitors Regulation Authority, Duncan specialises in the regulation of solicitors and solicitors practice management
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