Some 153 law firms today entered the last-chance saloon after failing to secure professional indemnity insurance (PII) during the last 30 days.
Under the new PII arrangements, they are now in the second stage 60-day ‘cessation period’, during which they can still seek insurance but cannot take on new clients as the prepare for wind-down.
If they fail to find cover before 30 December, they will have to close.
In all 226 firms entered the new 90-day extended policy period (EPP) for those who failed to find PII by 30 September, during which their 2012/13 insurers have to provide cover.
Some 73 managed to find cover in the initial extended indemnity period – of which 20 signed on the dotted line yesterday, according to the Solicitors Regulation Authority.
The SRA indemnity insurance rules provide that during the cessation period, firms must ensure that they undertake no activities in connection with private legal practice and accept no instructions save to the extent that the activity is “undertaken to discharge its obligations within the scope of the firm’s existing instructions or is necessary in connection with the discharge of such obligation”.
The SRA does not regulate the cost of premiums during the EPP, but the Law Society has said that many insurers have chosen not to charge for it as, in the event that the firm enters into run-off, these costs will be recovered via the run-off premium.
The number of firms without insurance is far lower than some of the predictions that as many as 1,000 small law firms could fail to find insurance in the wake of the problems with Balva and Berliner.
For those firm that have to cease practice, their 2012/13 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 1 October.