Following from the SRA publication of the second stage of its Financial Protection policy review, the Law Society has called on the Legal Services Board (LSB) to reject the SRA decision to burden the Compensation Fund with PII cover for uninsured firms.
The Law Society supports:
– The removal of the Assigned Risks Pool (ARP) and the introduction of a 90 day extended indemnity period (EIP) and cessation period. If a firm has not found a new insurance policy after this 90 day period, it must close. The SRA agrees with the Law Society that the 90 day period should be backdated to the end of the original policy. The Law Society argues that the EIP will require enforcement action by the SRA to avoid firms operating with no insurance. The Society supports amendments to authorisation rules to enable this, and expect to see detailed rules when released by the SRA in May
– The maintenance of insurance coverage throughout the EIP and cessation period even if work conducted breaches the requirement to only conduct work in connection with existing instructions during the EIP. The Law Society had argued that any changes to this would result in potential client detriment and additional risk to the Compensation Fund
– The maintenance of insurance coverage throughout the EIP and cessation period even if claims arise out of work conducted in breach of the requirement to not accept new instructions. The SRA will allow insurers to obtain reimbursement from insureds who conduct work contrary to the rules
– The decision of the SRA not to introduce a notice period prior to the EIP. The Law Society argues that the removal of a single renewal date from October 2013 will lead to more flexibility in policy length, and allow for issues to be worked through by insurers and their firms without using the EIP provision
– The introduction of the requirement that insurers be transparent about their credit ratings for the 2012 renewal
The Law Society does not support:
– The transfer of the ‘side-arrangement’ from the ARP to the Compensation Fund, where coverage is provided to those firms who are uninsured, and have not applied or are ineligible to join the ARP. The Law Society have called for the LSB to reject these changes until there is a full review of the Compensation Fund
– The SRA failure to bring in mandatory acceptance periods
– The cost issue of the EIP premium not being addressed
The full response of the Law Society to the SRA consultation on Financial Protection policy can be found here
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