The Law Society has warned solicitors to exercise caution when taking out their next professional indemnity insurance (PII) policy, and double checking whether the company will be able to meet any insurance claims.
The warning is issued after the recent financial collapse of two insurers, Quinn and Lemma.
The Law Society is keen to point out that the list of ‘qualifying insurers’ that the SRA publishes is not in fact vetted.
A ‘qualifying insurer’ is simply authorised by the FSA to conduct business in the UK and has agreed to write solicitors’ PII policies.
Just because a firm appears on this list it does not mean that the firm is not at risk of becoming insolvent.
The Society is advising solicitors to obtain an insurer’s rating before selecting their provider, as they believe an official rating from an independent ratings agency is the most objective measure of a firm’s financial security.
Law Society president Lucy Scott-Moncrieff said: “Firms should not make one of the most important purchasing decisions for their practice without knowing the facts.
“While cost is a key consideration for firms, they need to be absolutely confident that their insurer will be able to meet its obligation to pay claims. Depending on a firm’s business structure, uninsured loss can have devastating personal consequences.
“Firms should also consider whether the indemnity limit of their policy is sufficient to cover the potential liability of their firm. The Law Society has prepared additional guidance about top-up and excess layer cover.”
