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SRA Waiver still available for insurer insolvency under EIP

SRA Waiver still available for insurer insolvency under EIP

175 firms still in the new Exetended Indemnity Period, that replaced the ARP in September. The APR was seen as a barrier to entry into the insurance market due to the obligations of participating insurers to contribute to the 'pool'.


The new Extended Indemnity Period replaced the Assigned Risks Pool for firms who are unable to obtain qualifiying indemnity insurance by 30th September 2013.Such firms are now given a 30 day period to continue to practice and to try to obtain new cover. If qualifying insurance is obtained, the new insurer must backdate the policy to the start of the EIP. If not, firms will enter a cessation period [CP] of 60 days when they can not accept new instructions, but are permitted to continue work in connection with existing instructions.

Firms that can not find new insurance will have to cease practice as before and mandatory 6 year provide run off cover. The main difference from the ARP scheme is that a firm can now practice as usual during the EIP but when in the CP they must plan for the orderly closure of the firm. Each firm must ensure that it and each principal and employee, undertakes no activities in connection with private legal practice or takes no instructions other than those that are necessary to discharge their regulatory obligations.

The new cover must still comply with the minimum terms and conditions [MTC] that cover activites outside existing work, but undertaking such work will result in disciplinary action and liability to the scheme. A practice note has been issued that allows a firm 4 weeks to find replacement cover in the event of it's insurer becoming insolvent. There is also a very helpful guidance note as to how to close your practice available on the Law Society web page.

The main Sucessor Practice Rules still apply [ PII Guidance 20 August 2013 para 10.2.1] with the the SRA Handbook Glossary definition still continuing. There does not seem to be any provision to apply for a waiver such as existed for non payment of ARP premiums, the only guidance seems to be to ask your insurer for time to pay the premiums in the usual manner.

At least, it would seem that there will be more clarity to practitioners who face insolvency, and an end to the nasty surprises when a letter arrives a year or two after administration that may have been arranged by other partners, alleging huge non payment of APR premiums and an appointment before the SDT for non compliance as happend on a number of occasions with the old scheme. It is clear however from the guidance on insurer insolvencey that an application can still be made in exceptional circumstances under rule 19 where cover can not be obtained.

The Law Society announcecd last week that 175 firms are now facing closure after failing to secure professional indemnity insurance, 10 further firms who entered the EIP have secured cover leavin the remaining firms in the 90 day cooling off period.

For any advice and assistance for issues like these please do call Jeremy on 0844 2722322 or submit a comment below. Jeremy will come back to you at the earliest convenience.

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