Law firms unable to secure professional indemnity insurance (PII) because of Covid-19 can prolong the extended indemnity period by agreement and with regulatory approval, the Solicitors Regulation Authority (SRA) said yesterday.
Firms unable to obtain a new policy go into the extended indemnity period under their existing policy, made up of a 30-day extended policy period (EPP) and then a 60-day cessation period (CP).
By the end of these 90 days, firms have either to obtain cover or close.
In guidance published yesterday, the SRA said it knew that some firms whose renewal date passed during the crisis have not been able to secure PII because of “practical difficulties”.
For example, some firms have had problems contacting their broker because their operations have been suspended, others have seen key personnel unable to complete the renewal process due to illness/being hospitalised/caring responsibilities, while a further group needed more time to get finance in place to pay for premiums, including potentially access to government Covid-19 support.
In such situations, the regulator said, firms “may be able to agree” with their insurer an extension of the EPP, CP or both. If the insurer agrees, the firm then has to apply to the SRA for a waiver from provisions in the SRA indemnity insurance rules.
The SRA said: “Insurers can ask that as a condition of any extension to the EPP or CP that you pay any premium due up front.
“You will need to confirm any payment arrangements with them and confirm in your waiver application that you have or will make payment to the insurer for any additional premium for the extension.”
Firms that cannot agree an extension and reach the end of the 90 days must notify the SRA and close.
Law Society president Simon Davis welcomed the move, for which he said Chancery Lane had lobbied. “The insurance market was already hardening before the before the pandemic, and the lockdown seems likely to throw up new problems for firms trying to secure the requisite cover,” he said.
“The SRA’s speedy and positive action creates space for firms to arrange extra time to resolve issues. A good example of close consultation working to the benefit of the profession and public.”