Indemnity insurance

A potential new professional indemnity insurer has blamed the Solicitors Regulation Authority’s failure to tackle the market’s problems more quickly as the reason it will not be offering cover to law firms this year.

The Court of Appeal has once again declined to follow the landmark House of Lords ruling in Sephton when deciding when the limitation period starts running for the purposes of a professional negligence claim. It is a decision hailed as good news for lawyers.

Proposals from the “timid” Solicitors Regulation Authority to reform the market for professional indemnity insurance are inadequate and will only worsen already fears for the future of the market, the Association of British Insurers has warned. However, the SRA’s blueprint has been welcomed by the Law Society and the Council of Mortgage Lenders.

The Solicitors Regulation Authority has radically reworked its reforms of professional indemnity insurance, delaying the end of common renewal for two years and kicking the question of compulsory cover for financial institutions into the long grass. Solicitors will also be liable to pay up to £30m of claims arising from the ARP during its final year.

The Solicitors Regulation Authority is weighing up whether evidence that the underwriting criteria used by professional indemnity insurers disproportionately affects black and minority ethnic solicitors amounts to unlawful discrimination, Legal Futures has discovered.

Clients are expressing much more concern about the way the largest UK law firms are managing risk than before – and than the firms’ own lawyers, a survey has found. While just 21% of lawyers perceived risk management to be a “key priority”, 47% of clients thought it was.

The Legal Ombudsman has criticised changes to the minimum terms and conditions for solicitors’ professional indemnity insurance that were approved by its parent Legal Services Board just last year.

Removing financial institutions from compulsory professional indemnity insurance cover will cause “serious detriment to clients and solicitors” if it is forced through this year as planned, mortgage lenders have warned.

Excluding claims by financial institutions from compulsory professional indemnity insurance cover will harm consumers and smaller law firms, cut access to justice and do little to reduce conveyancing claims, the Law Society has said.

A temporary extension of cover should replace the pooled liability insurers have for struggling law firms, the Law Society has proposed. The extension of existing cover should be for a minimum of three months and its cost based on the current premium.

Rules governing law firms’ ability to acquire the case loads of failing firms should both be relaxed and made more certain for the benefit of the profession and clients, insolvency and legal experts have argued.

Solicitors Regulation Authority proposals to exclude lender and other financial institution claims from the scope of compulsory professional indemnity insurance will be “massively damaging to the profession” and lead to more expensive and longer conveyancing transactions for the public, Law Society chief executive Des Hudson has warned.

Solicitors are facing “bumper” years of claims for professional negligence as recession-driven legal actions start to bite, a leading broker has warned. The latest High Court figures indicate that negligence claims against solicitors rose from 80 to 210 in 2009, which is more than any other type of professional indemnity claim, and Lockton has predicted that the figure will continue to rise.

Solicitors have had to cover £15m in unpaid premiums of law firms that have been in the assigned risks pool (ARP) during its first 10 years, it has emerged. Of that, £6.1m is for run-off cover for firms that closed without insurance, and the figures reveal that the Solicitors Regulation Authority has collected just £500,000 in run-off premiums since the ARP was set up in 2000.

Three-quarters of lawyers who sought help with health problems last year complained of stress, support charity LawCare has reported, while warning that drug abuse in the profession is worse than its statistics indicate. LawCare opened 517 new case files in 2010, down from a record 549 in 2009, splitting 60/40 between women and men.