The SRA’s consultation on Professional Indemnity insurance (PII) and the Compensation Fund closes on 15 June 2018. https://goo.gl/DreQc3. They may adversely affect the pockets of many solicitors both while they are in private practice and after retirement, so everyone should make time to consider them and respond.
The reality of the proposals for many firms is that for much of their work, compulsory cover will be reduced to nil, in relation to most commercial clients, from the current minimum of £3m per claim/£2m for partnerships and sole practitioners. For others, the proposed reduction is to £500,000 or £1m for conveyancing. Note that policy limits include claimants’ costs, and if a claim exceeds the limit, the firm must bear a share of defence costs.
Our opinion on the proposals (that they are misconceived) are set out in our March Newsletter: https://www.legalrisk.co.uk/wp-content/uploads/2018/03/March18.pdf
An observer might argue that the Dreamvar nightmare would never have happened if Mishcon de Reya were not so well insured, because their insurance makes them a ‘deep pocket’, and that the SRA reforms are therefore to be welcomed. There are two answers to this. First, the judge said Mishcons were able to absorb the loss “with or without insurance”. Second, the true lesson of Dreamvar is not that Mishcons were the handiest ‘deep pocket’, but that solicitors operate in an environment so hostile – where they can be found liable even when it is common ground that they have done nothing wrong – that it is all the more important to err on the side of caution and breadth of cover when it comes to professional indemnity insurance.
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