Insurance cover-up: solicitor struck off for trading without PII

Lack-of-cover cover-up

A solicitor who owned a firm indicated in an email to the Solicitors Regulation Authority (SRA) that the firm was entering the ‘run-off period’ of its PII policy.

This was incorrect. The firm had not renewed its policy.

The following day, when the term ended, the firm entered the ‘extended policy period’.

In the email, the solicitor also indicated they understood they would not be able to take on new instructions.

The solicitor’s insurer was unwilling to renew the firm’s policy, and brokers were unable to find other underwriters that would provide cover on acceptable terms.

As a result, the firm had until the end of the ‘cessation period’ of the policy to stop practising.

The solicitor applied to the SRA to set up a new firm, but could not provide the information necessary for the new entity to be approved.

Another firm contacted the SRA for clarification of the firm’s status, after receiving an email from the solicitor in a conveyancing transaction in which the firm was acting for seller.

This was almost a whole month after the solicitor had been notified by the SRA that the application for authorisation of the new entity was closed because of the solicitor’s failure to provide the required information, including information on PII.

The SRA contacted the solicitor on the same day.

The solicitor confirmed they were acting for the seller – but only as a “one-off”, and that new enquiries had been turned away.

However, the SRA found the firm had worked on four ongoing matters when it should have been closed.

The solicitor also failed to inform clients that the firm was no longer covered by PII.

The solicitor denied any dishonesty to the SRA, claiming that they had misunderstood the rules.

Although the solicitor referred to personal and health difficulties they were experiencing at the time, no detail or evidence was provided to the tribunal.

The SDT finding

By undertaking legal practice activities without qualifying insurance, and giving misleading information about the status of their insurance and activities, the Solicitors Disciplinary Tribunal (SDT) found the solicitor in breach of the SRA Principles 2019:

• Principle 2: “You act ... in a way that upholds public trust and confidence in the solicitors' profession and in legal services provided by authorised persons.

• Principle 5: “You act … with integrity.”

• Principle 7: “You act ... in the best interests of each client.”

The solicitor was also found to have breached rule 4.2 of the SRA Indemnity Insurance Rules 2019:

“Each authorised body that has been unable to obtain a policy of qualifying insurance prior to the expiration of the extended policy period, and any principal of such a body, must ensure that the authorised body, and each principal or employee of the body, undertakes no activities in connection with private legal practice and accepts no instructions in respect of any such activities during the cessation period …”

The tribunal reviewed evidence, including letters, witness statements and attendance notes of telephone conversations.

In light of this, the SDT stated the solicitor could not have genuinely believed they were not acting on live files after the cessation period, despite what they had told the SRA.

It added: “the Respondent could not have genuinely believed that [their new law firm] application was ongoing”.

The SDT also highlighted that the solicitor had not told clients or members of firm staff the firm needed to be closed.

According to the tribunal, the solicitor “deliberately and dishonestly concealed the position from the SRA, the intervention agents, a third-party firm of solicitors and [their] clients”, with several breaches of the SRA Accounts Rules.

Their actions “undermined the trust the public placed in the profession and the provision of legal services”, placing clients at risk.

The solicitor, who did not attend the hearing, was struck off the roll of solicitors and ordered to pay costs of more than £10,000.

Your ethical obligations

The case demonstrates the serious consequences of a breach of SRA Principles.

It highlights the overarching high-level standards of ethical behaviour expected of solicitors.

Firms of solicitors (including sole practices) are required to take out and maintain PII in accordance with the SRA Indemnity Insurance Rules.

The rules require firms to ensure that clients have the benefit of compulsory PII.

It is crucial to follow the provisions of the SRA’s Indemnity Insurance Rules.

Firms that fail to renew their professional indemnity insurance enter a 90-day extension period, which is divided into two parts:

•  an extended policy period of 30 days. During this period, firms can continue to accept new instructions and work on existing matters. Firms must notify the SRA within five business days of entering the extended policy period.
• a cessation period of 60 days. Firms must stop accepting new instructions but can complete existing matters. After the end of the 60 day cessation period, work on all matters must cease.

Anyone who is unable to renew their PII, but takes on new work during the policy cessation period, may face disciplinary action and liability for reimbursement if the insurer experiences a loss as a result of the breach.

Mitigating your risks

As a member of the Law Society, you are part of a community of over 200,000 solicitors with access to a range of benefits to support you.

This includes practical resources and world-class learning to help you mitigate your risks:

• our PII practice note, which sets out the regulatory requirements for PII, the minimum terms and conditions (MTCs), how much cover is required and the market outlook

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