Proposed PII changes setback
Numerous stakeholders publicly lauded the LSB’s decision to delay a decision on the SRA’s proposed changes to the minimum terms and conditions for…
Numerous stakeholders publicly lauded the LSB’s decision to delay a decision on the SRA’s proposed changes to the minimum terms and conditions for solicitors PII. As specialist advisors to law firms on risk and compliance issues, we agree and are somewhat relieved that any changes will not now take effect until next year.
Having read both the SRA Consultation and summary of responses, we remain unclear as to why the regulator appeared so determined to push through these changes this year, particularly the reduction in the minimum level of cover. That is not to say that the SRA was wrong to hold the consultation – there are clearly many issues which need careful thought and debate - but given that many firms would have been left in a state of flux with renewal period already upon us, the LSB’s stance has now allowed firms the breathing space they need to properly consider their risk profile and decide on an appropriate level of cover.
Even without the changes, obtaining affordable PII remains a problem for many firms. The extensive work that the Weightmans Compli team does to assist law firms across all sectors of the industry and of all sizes is testament to the very real risks posed.
New trends in claims against solicitors are also emerging: we have seen claims management companies seeking out potential claimants who may have settled their personal injury claim too early or at too low a level. Similarly, commercial litigators who have not fully explored all available means of funding a client’s case are falling victim to negligence claims. It goes without saying that the costs involved in investigating such claims and paying out on a ‘loss of chance’ basis can be significant.
Identifying and managing risk can seem like an expensive, burdensome task when coupled with continued fee-earning targets and other management responsibilities. But failing to do so could be catastrophic. Any firm that was considering lowering its PII cover to £500,000 in time for October has been given a second chance to take stock and look again at the inherent risks of doing so. Such an assessment is crucial when you consider that PII premiums are unlikely to drop by more than 5 - 15% (source: SRA/QBE) should the level of cover be reduced to the minimum. In addition, there may be other requirements you need to factor in to the equation, notably the EU requirement for any firm carrying insurance mediation (e.g. arranging defective title or after-the-event insurance on behalf of clients) to maintain cover of approximately £1m.
The additional time now gives the SRA and all stakeholders an opportunity to further engage in dialogue about the impact of the changes on the regulatory objectives, the insureds and the clients to ensure that decisions are reached on a fully informed basis. After all, it’s good to talk!