Furious firms threaten action over “botched” SRA insurance list

Law firms named for allegedly not obtaining indemnity insurance have attacked the profession’s regulator – with some understood to be considering legal action – claiming the process was unfair and slapdash.

The Solicitors Regulation Authority published last week a list of 136 firms that had allegedly not obtained insurance by the SRA’s end-of-year deadline and had, according to the regulator, subsequently been forced to close. 

In a statement accompanying the PII list on the authority’s web site, the SRA said: “… firms carrying on a practice that failed to obtain qualifying insurance cover starting on 1 October 2013 entered the extended policy period (EPP) which provided extended indemnity cover for a 90-day period.” 

It went on to say that the listed firms “are those that entered the EPP but did not obtain qualifying insurance before the end of the extended period of cover, namely by 29 December 2013. In the majority of cases the firms closed in an orderly manner, dealing appropriately with client files and monies. As these firms do not have qualifying insurance, they are not able to carry on a practice or progress clients’ matters after 29 December 2013 although they may deal with administrative tasks”. 

That move has triggered outrage among some firms that claim the authority’s statement is misleading. Some firms say they did not take insurance cover because they were merging, while several sole practitioners have claimed they were retiring or going into locum arrangements. 

They claim the wording of the SRA statement and inclusion in the list implies that insurers considered them to be poor risks. Frank Maher, a partner at Liverpool-based PII specialist law firm Legal Risk, told The Lawyer several law firms listed had contacted him, including the senior partner of a firm considering defamation proceedings against the regulator. 

According to Maher, that practice had obtained a quote for insurance that it could afford, but declined in the end to take the policy because the firm merged instead. The firm with which it merged is fully covered, but, says Maher, the original practice remains on the list. 

Similarly, a firm fingered by the SRA was Norwich-based Cole & Co, which was taken over by Leathes Prior last year. David Clarke – a former partner at Cole & Co and now in the Leathes Prior partnership – told The Lawyer: “I am alarmed and appalled that Cole & Co were incorrectly named on the list … This is simply incorrect and has caused embarrassment.” 

Clarke maintained that Cole & Co received “an acceptable” insurance quote last September, but it was not taken up in the light of the planned merger. “The merger duly took place on 1 November,” said Clarke. “As such the firm was always covered by indemnity insurance, both pre and post-merger, and no client was placed at risk. The SRA was kept fully informed of the position.” 

Clarke said the SRA’s actions could have led “local firms to jump to the erroneous conclusion that my firm was forced to close and/or merge. This clearly has the potential to interfere with and damage the reputation of the merged firm and cause distress and embarrassment to the partners”. 

Elsewhere, a former sole practitioner, who asked not to be identified, told The Lawyer that the SRA had explicitly informed him that he did not require insurance authorisation because he was moving out of reserved area work to practise as a locum with various law firms that would provide cover under their policies. Nonetheless, the name of that solicitor’s former practice remains on the SRA list. 

That solicitor said he learned before the end of the year that the SRA would name his former sole practice. He claims to have written to the authority asking for an explanation, but says he received no response. The solicitor has also written to Law Society President Nick Fluck to complain about the SRA’s approach. 

“The SRA is incompetent and should no longer exist,” said the solicitor. “The insurance authorisation process should be retuned to the Law Society.” 

Maher said he had also been contacted by a sole practitioner who has retired but who has nonetheless been named by the SRA. “The SRA list is confused and confusing,” said Maher. “There are some firms on it that shouldn’t be, and I reckon some firms that are not on the list that should be. And it is quite detrimental to the reputation of a lawyer or a firm to be named, so I can understand why people are upset.” 

An SRA spokesman reacted by saying that “if firms cannot provide evidence of a valid indemnity insurance policy, they cannot practise. If they continue to do so, they will face regulatory action. If they believe they do have valid indemnity insurance then they should provide us with evidence of it post haste”. 

The spokesman denied the regulator had implied that all firms on the list had failed in their attempts to obtain cover, despite its web site clearly using the word “failed”. 

A Law Society spokeswoman confirmed that the head of the representation body had been contacted by a solicitor. “The society’s president has been copied into one complaint made to the SRA about their publication of the list. We are taking the matter up with the SRA urgently.”