Firms should now be well advanced in preparations for the new provisions which come into force on 25 November 2019. There are still further minor amendments in the pipeline. Meanwhile, the SRA has published guidance on Conflicts of Interest. However this does not address own interest conflict issues arising from the decision in SRA v Howell Jones LLP Case No. 11846-2018 which will be addressed in further guidance on Putting Things Right. See www.legalrisk.co.uk/Conflicts.
We noted previously that the prohibition on limiting liability below the compulsory minimum (£2 million for sole practitioners and partnerships, and £3 million for incorporated practices and licensed bodies/ABSs), had been removed from the Code of Conduct, while urging caution that all may not be as it appeared. The prohibition has resurfaced in rule 3.2 of the SRA Indemnity Insurance Rules 2019. A breach of the current provision was the subject of a recent decision of the Solicitors Disciplinary Tribunal.
The requirement to effect ‘adequate and appropriate cover’ continues in rule 3.1 of the same rules. The difficulties with this provi-sion remain the same. How much is ‘adequate and appropriate’? It is almost impossible to put a figure on this. We advise many leading firms on limitation of liability and act in substantial coverage disputes, and in our experience there are many cases where the firm’s exposure may be far in excess of anything they might have imagined when taking the work on.
The value of a transaction may not be a fair indication of the potential exposure from any claims, particularly where aggregation issues arise under the policy, a point overlooked by many firms. Even if this is taken into account, it may not be practicable to obtain cover for anything like the full amount.
Frank Maher, Sue Mawdsley and Francis Dingwall will be speaking at the New Standards and Regulations Seminar presented by Howden UK Group Limited. For more information, please see here.‹ Back to Publications