Check you are covered against SRA investigations

Billy Warner, client adviser at Miller, discusses the extent of coverage and the insurance options solicitors may wish to consider to protect themselves.

Following the recent article published in the Law Society Gazette, 26 June 2017 – Check you are covered against the SRA. Miller has received many phone calls and queries with regard to the extent to which the professional indemnity insurance would provide protection, should firms be subject to an investigation by the Solicitors Regulation Authority (SRA).

The facts

The SRA brought 19 charges alleging professional misconduct against Leigh Day at the Solicitors Disciplinary Tribunal (SDT). Whilst the SDT subsequently cleared Leigh Day of all charges, Leigh Day have had to meet the defence costs, reportedly in the region of £7 million. Whilst the SRA may be pursued for these costs, due to the very nature of the SDT, there is no guarantee that these will be recoverable.

Professional Indemnity – minimum terms and conditions

Solicitors may have assumed that their professional indemnity policy will meet such defence costs. This is not the case. Since 2010 the minimum terms and conditions have clearly stated that that the insurance will not indemnify the insured against defence costs in relation to disciplinary proceeding under the authority of the law Society (including, without limitation the SRA and the SDT).

It is normal market practice for insurers to provide a professional indemnity policy which complies with the minimum requirements, but does not go beyond these levels. As such, many firms will be exposed to such costs.

This currently poses an issue for firms.

What are your options?

There are policies that can be purchased in order to cover these costs, either in the form of an endorsement to your current PI policy, or a completely separate policy altogether. Your main options are:

1. Do nothing

You can of course choose to do nothing. However our advice would be to proceed with caution. As a solicitor, you should be prepared for the possibility that the regulator might bring investigations against your firm and that, unless you have adequate coverage, you will be the one to bear the costs of defending these allegations, even if no misconduct was found.

2. Purchase a regulatory defence cost endorsement to your current PII policy

Most insurers can provide regulatory defence costs cover endorsements also known as COLP and COFA cover, which range from smaller limits of £100,000 to the full limit of the policy and vary in price based on the size of the firm, but are generally inexpensive to add on.

3. Purchase a D&O policy

A more comprehensive D&O policy can provide you with a much wider range of coverages including regulatory defence costs. Other such coverages include, your role as a trustee, public relations cover, employment practices liability to name but a few.