Law firms without new insurance breach rules by failing to notify SRA

Forty-six law firms facing closure for failing to secure new insurance have breached Solicitors Regulation Authority (SRA) rules for not notifying the regulator that they have entered the second part of the extended policy period (EPP).

A total of 136 out of 277 firms have secured a new insurance policy since entering into the 90-day EPP on 1 October.

The SRA has written to the 141 law firms now facing closure to advise them of what they must do next.

But only 95 of the 141 firms have notified the regulator they have entered the second part of the EPP, a 60-day period during which they cannot take on any new business, known as the cessation period.

If firms still have no insurance after the cessation period closes on 29 December, they will have to close down.

An SRA spokesman said: “It is important that firms tell us they have entered the cessation period because of the restriction of taking on new business.

“While we can work out that there are a “missing” 46 firms, we can never assume anything.

“We need to know that they have entered it so that their business can be properly regulated. That’s why we insisted on a clause for notification in the Insurance Indemnity Rules.”

Penalties for firms that fail to notify the SRA they are in the EPP range from a verbal or official warning to fines.

The SRA’s letter to the 141 law firms in the cessation period reiterates the firms’ obligations and responsibilities, and says that an SRA supervisor will work with the practices to draw up a plan for complying with guidance if they need to wind down their practice.

SRA director of supervision Mike Hale said: “Of course, it could be that these firms do secure a new policy between now and 29 December, and nearly half of those who entered the EPP have done just that.

“But there is a danger that firms do not plan for the worst, and that could put their clients’ interest at risk, meaning we would have to step in.”

The EPP was introduced for the first time this year to replace the assigned risks pool, along with the removal of the single renewal date.

These changes were made under the SRA’s Financial Protection Policy for uninsured firms.