The number of law firms that failed to find professional indemnity insurance by 1 October has continued to grow, Legal Futures can report.
It has also emerged that law firms are responding slowly to the next deadline facing them – practising certificate (PC) renewal at the end of this month.
The Solicitors Regulation Authority (SRA) said yesterday that 219 law firms entered the new extended indemnity period (EIP) that gives them 30 days to secure backdated cover.
This is an increase of 18% (34 firms) on the 185 that had notified the SRA within the five days provided for by the indemnity rules. Of the 219, 28 have since found insurance.
An SRA spokesman said the regulator would consider whether to take action against those which reported late. He said: “Notification is part of the insurance rules, and if we were to take action, we would look at the circumstances surrounding it and make sure our response was proportionate and appropriate.”
Firms unable to find fresh insurance by the end of this month will enter a cessation period of 60 days in which they will be unable to accept new instructions and can only perform work in connection with existing instructions.
If firms are unable to obtain insurance outside of the EIP or cessation period, then they will have to cease practice and their existing insurer will be required to provide them with the mandatory six years run-off cover. The run-off cover will be deemed to have commenced from the start of the EIP.
Law Society chief executive Des Hudson said yesterday that Chancery Lane’s “interim assessment” of the renewal season “suggests that the market overall has been benign with rates flat or marginally down, but with a numerically small segment facing acute difficulties”.
He explained: “There are clearly two markets operating. Large firms are able to obtain cover relatively easily with a number of rated insurers available to consider applications on an open market basis. This is not the case at the smaller end of the market. It is likely that most firms unable to secure affordable quotations or any quotation at all are small and medium-sized.”
Firms need to submit their PC renewal applications by 31 October. In a report to tomorrow’s meeting of the SRA board, chief executive Antony Townsend said the “pace of application submission is behind where we would like it to be”. The process began on 16 September, and as of today 16,687 PCs have been issued; there are nearly 130,000 practising solicitors at the moment.
“We have launched a new communications push to remind firms and individuals of the need to prepare and complete their applications as early as possible to ensure compliance with the deadline,” Mr Townsend said.