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The Solicitors Regulation Authority (SRA) has taken the unusual action of publishing the names of 136 firms that are being forced to close as a result of failing to secure professional indemnity insurance (PII).
The regulator said most of the firms involved have co-operated with the forced wind-down process the SRA imposes when insurance is not secured, but that there were a “small number of firms that failed to close properly and they are subject to ongoing robust action”.
The publication of the list comes at the end of the last mandatory renewal period for PII cover, with firms now able to choose when they renew. It also follows the scrapping of the assigned risks pool (ARP). The renewal deadline was 1 October 2013, after which those firms failing to obtain new cover were placed in the extended policy period (EPP), which was introduced to replace the ARP (14 April 2011).
The SRA gave firms an extended period of indemnity insurance for 90 days. Firms that did not obtain PII cover by 29 December were under a regulatory obligation to close. In early January, brokers raised concerns over the SRA’s handling of the PII renewal process after the regulator admitted it had lost track of some uninsured firms (8 January 2014).
In a statement today, the watchdog said it does not normally publish the names of firms that have closed because they are under an obligation to inform clients of that fact themselves.
However it added: “The SRA has taken the decision on this occasion to publish the names in the interests of protecting consumers and third parties. Publishing the names adds an extra layer to the protection already in place.”
There has been some confusion over how claims arising from firms that have failed to shut down as the SRA has prescribed would be handled. It is thought that the SRA’s discretionary compensation fund would kick in but the SRA’s rules state that the maximum grant that may be made from the fund is £2m, which would cover sole practitioners but represents a £1m shortfall on the statutory cover required for ABSs and LLPs.
Among the firms on the SRA’s list are Manchester-based EOS Law, from which Newcastle-headquartered Ward Hadaway picked up the majority of the work in progress (WIP) in December (20 December 2013), Harris Cartier (14 October 2013) and HilliersHRW (19 December 2013).
Alistair J Brett, the former head of legal for The Times who was suspended from practice for six months by the Solicitors Disciplinary Tribunal (SDT) after being charged with misleading a court (6 December 2013), also appears on the list.
The way the legal profession is insured will be examined in the High Court this year in a major test case that could have implications for how all firms obtain indemnity cover (7 January 2014).