Who pays?

A judge rules that an LLP member is not responsible for indemnity insurance premiums

High Court
High Court upheld LLP member claim

A High Court ruling over who can be held liable for firms’ indemnity insurance premiums in the assigned risks pool (ARP), the insurer of last resort, has upset what has been a smooth renewal period.

It is the final year of the ARP, which is to be scrapped from the October 2013 renewal date. The move to abolish it, announced by the Solicitors Regulation Authority (SRA) in April 2011, was intended to attract more insurers to the market and bring down cover prices. This can only happen if the SRA stays committed to its promise to force firms in the ARP to pay their premiums.

Last year the regulator promised a tougher crackdown and for many insurers it seems to have worked. Then came the High Court ruling.

Earlier this month Nicholas Strauss QC, sitting as a deputy judge, ruled that individual members of LLPs sitting in the ARP could not be held individually liable for the unpaid premium. Ariel Zeckler, a member of the now-defunct Zecklers, argued that he was not a party to the contract between the firm and its insurers so why should he be held liable?

The judge agreed, saying there was no direct contract that needed to be upheld. This poses a problem: who should be paying up if not the LLP members?

The SRA is considering an appeal.

When it comes to solicitors’ insurance, nothing ever goes smoothly.

Katy Dowell