The Solicitors Regulation Authority (SRA) does not know the insurance position of at least 50 law firms, but there may be even more out there uninsured, it admitted yesterday.
Those yet to inform the regulator that they do not yet have insurance are breaching regulations and face enforcement action, it warned.
Firms had until last Wednesday to inform the SRA if they were entering the second section of the new extended policy period (EPP), having failed to secure new professional indemnity insurance cover by 1 October.
A total of 79 firms have been in touch, but with 238 firms originally saying they wished to invoke the EPP and only 108 have since secured cover, “a large number are still unaccounted for”, the SRA said in a statement that updated the number of firms involved.
The EPP exists to allow firms to continue trading while the new cover consists of 90 days. The first 30 days, the extended indemnity period (EIP), allows firms to carry on as normal while they seek backdated cover. The 60-day second phase, which started on 31 October, is called the cessation period, during firms can only deal with existing instructions, while also working towards closing down at the end of the EPP if they have not found insurance by then.
Agnieszka Scott, director for policy and financial protection, told Legal Futures that while the figures suggest there are still around 50 firms that have not notified the SRA of their position, “there may be more firms that have not got in touch at all. We have seen the number of notifications increase by more than 50 since the start of the EPP, so we know there are latecomers and we do not have their contact details”.
Asked why the SRA did not simply contact the firms which it knew entered the EIP and have not confirmed their position since, she said: “Our officers have other priorities at this time. It is not a good use of their time to be chasing firms that cannot comply with their regulatory obligations.”
Ms Scott said the SRA has so far shown “a lot of understanding” towards firms that have been late in letting us know their insurance position, “but now, more than a month later, there really is no excuse”.
It is a requirement in rule 17.3b of the indemnity insurance rules that firms must within five working days notify the SRA and their existing insurer that they have entered into the cessation period. The SRA will now “have to think about appropriate enforcement action for those that fail to contact us”.
Ms Scott added: “What these firms need to remember is that if they failed to secure a new policy by 1 October, they automatically qualified for the EPP and are therefore still practising with insurance. They won’t be automatically closed down if they tell us they don’t have a new insurer yet, but they are in breach of the insurance regulations by not contacting us.”
Notifications from firms should be made in writing to InsuredReports@sra.org.uk, stating who the firm’s insurer was for 2012/13.