Row over insurance cover in liberalised regulation regime
Law firms could be left in an insurance gap and clients out of pocket in cases of negligence if plans to drop barriers to lawyers switching regulators are given the green light, the solicitors’ trade union said on Friday.
In yet another round of sniping in the war of words between the Law Society and the Solicitors Regulation Authority, the arcane role of run-off insurance cover for law firms was put in the spotlight.
The SRA has proposed that lawyers should be allowed as much flexibility as possible in choosing which authorised regulator should oversee them. The Law Society has said that it supports in principle the authority’s aim “to encourage a competitive market by removing unnecessary barriers”.
However, the organisation’s chief executive, Catherine Dixon, warned that switching regulator “must not be at the expense of client protection. We are concerned that the SRA’s proposals could leave existing and past clients of firms that switch regulator without appropriate cover.” Dixon added: “We cannot be confident that other regulators’ professional indemnity insurance requirements can appropriately accommodate an unknown number of solicitor firms coming under their umbrella.
“We will therefore be requesting that any changes to the regulatory framework which enables solicitors to change regulator ensures that PII arrangements protect our clients’ interests.”
An SRA spokesman said that the authority had raised client protection issues in its recent consultation on proposals for switching regulators. “Our aim as always is to strike the right balance on removing unnecessary restrictions on firms without reducing the protections in place for users of legal services.”