Up to 175 firms at risk of closure after failing to secure indemnity cover

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  • We shall find out in due course whether this is the extent of the problem, or whether there are firms who have not yet disclosed their position to the SRA. There are doubtless some bad firms in the 175, but there are also some who were unlucky for a variety of reasons. And it is not just a small firm issue, as there is at least one large firm among that number and others had a narrow escape.

    An insurance scheme which has ended up with a major global broker being forced to offer an unrated product to a large sector of the profession, and which has thrown over a thousand firms into the hands of Lemma, Balva and Berliner is broken. The one-size-fits-all approach, way beyond the requirements of any other legal profession in England and Wales, or anywhere else, is anything but outcomes-focused.

    Time for review on what level of protection should be required. The current requirement is unnecessary for some and unaffordable or unobtainable for others.

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  • Any big firms currently without cover?

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  • This whole process has been a total and utter shambles.

    We were originally told last year that we had two years' cover with Balvia. This summer we were told that Balvia had ceased trading, but not to worry as a new policy could instantly be arranged with Berliner at a very reasonable premium, with the bonus that cover was through till April 2015.

    We naively assumed that a German insurer would be at least as good as a UK one, sp duly signed up and forgot about PI cover for this year, merrily deleting the tsunami of emails from brokers.

    And then about 3 weeks before the end of September we found out - via The Lawyer, not our broker - that our policy was just a charade. So through no fault of our own we were suddenly thrown into a situation of having to try to find cover at the very last minute, only to find that many of the companies had already closed their books, and those that hadn't weren't interested in small firms.

    We spent literally hours analysing arcane bits of information about our billing history in order to complete proposal forms. And following the Law Society advice I personally spent about 2 hours completing the Chancery PII one (which required lots of information not required elsewhere) and finally pressed the `Submit' button ... only to receive about 5 seconds later an email reading: "We are sorry that we were not able to provide terms on the basis of the information provided."

    So why the hell didn't they specify the criteria to be met at the outset and save me (and no doubt hundreds of others) time we could ill afford?

    We eventually obtained a quote on Friday 27 September, and though it was expensive we accepted it immediately - when you've only got one offer it simplifies the decision--making.

    But the worst aspect of all this miserable chaos is that a firm now only has 3 months to close down if there's no cover in place by 1 October.

    Yes, in theory they might be lucky and find someone desperate enough to insure them in the following 30 days, but realistically you can't just carry on regardless in the hope that might happen.

    We've got staff who have been here for 15 years, and irrespective of any moral questions they are entitled to 12 weeks' notice (not to mention a massive redundancy payment). So what the hell were we supposed to do?

    Because we wanted to treat them as decently as possible we warned them that there was a risk that after a successful 24 years the firm might have to cease trading at the end of the year. Not surprisingly this caused widespread shock and distress.

    And when I was personally asked how big the risk was I said with complete honesty that I hadn't got a clue.

    Inevitably, the staff will have told their friends and families that the firm might have to close, so how wonderful is that for our reputation? That would really inspire confidence in both existing and prospective clients.

    Yes, I'm glad that I've managed to reassure them, though we’ve lost one key member of staff who felt constrained to apply for and accept a job with a large local rival. I don't at all blame him, he's got a wife and two young kids and he simply couldn’t take the risk that the job would have remained open until now.

    The complete idiots who devised this madness seem to have not the faintest idea of what life is like in real practice. They have caused a massive amount of damage to hundreds of firms throughout the country, yet they will never be held to account for it.

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  • Last year our previous broker with whom we had a long standing relationship was pushing Balva with an almost indecent degree of enthusiasm.

    The cost of the premium was in the order of 66% of the cost of an A- rated insurer.

    Despite that and the views of some partners we went with the A- rated insurer on the basis that we would not have any cover via the FSCS and the regulatory premises for Balva could not with the stereotype of Baltic policits be deemed solid.

    Despite making these representations to the broker that we did not want to place the business with Balva, my inference from their representations is that is was more advantageous to them in terms of fees: indeed I have heard it suggested that there were 'additional compensations' to brokers.

    I have no basis for establishing or not this rumour, but in context it is not suprising.

    As to why he was approaching Balva with such enthusiasm, god alone knows we had no problems obtaining A rated cover with a real terms reduction on the previous years premium.

    I have great personal sympathy for many who will be affected by the debacle arisign from Balva, Lemma, ERIC and Quinn, however that is tempered by the fact that caveat emptor must bite in some situations and in others the decision will have been motivated by greed, desparation or a combination of both.

    I wonder how the brokers will feel if they have failed to properly advise clients on the risks of taking a Balva policy and if so who's their insurers?

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  • As a non- lawyer but former private client of a city law firm I would be grateful for an explanation regarding how insurance for public liability operates. As from my perspective I don't understand why it is required. I paid a substantial figure (just under £5,000) to the city firm in question to act for my family in a property transaction. An oversight was made at the time of purchase which rendered the property legally defective. The company initially admitted that they had made an error due to the fact that they misread a report due to a minor typing error (I have an e-mail in which they state this). During my initial complaint I was informed that should the firm be unable to resolve this I would be entitled to claim against their insurers. However when they were unable to remedy the error due to its severity they renegaded on this. The experience has caused much distress and I have little faith in either the legal profession or the SRA, who from my understanding are supposed to protect clients from predatory practices such as this.
    My question is therefore - could I have taken my complaint directly to the firm's insurers? I was never given this option. Do I have the right to know who the firm's insurers are?

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