Law Society dubs unrated insurers 'unknown quantity'

The Law Society is warning solicitors to check the financial strength of an insurer before buying professional indemnity (PI) insurance, following the recent collapse of Quinn and Lemma.

The regulator said that it wants its members to use insurers capable of meeting claims, and dubbed unrated insurers an “unknown quantity”. It added that it wants to quell the misconception that because the Solicitors Regulation Authority (SRA) publishes a list of insurers that write solicitors’ PI, these insurers are vetted by the body.

The Law Society said it is aiming its warning at smaller firms to give them time to judge an insurers’ strength before the next solictors’ PI renewal in early summer.

The body warned small firms to beware of choosing cheap quotes over quality cover, which might be more expensive.

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.

“It is for the SRA to address the systemic risk of insurer failure, however, the Law Society is currently undertaking various activities aimed at mitigating this risk and providing a stable market for solicitors.”