Firms fear for future after failing to secure new PII

SRA working with Enterprise victims to find solution before the triggering of 'worthless' run-off cover

More than ten firms insured by the now insolvent Enterprise must 'move quickly' to secure a new policy or face 'further action' after missing the deadline to arrange cover, the Solicitors Regulation Authority (SRA) has said.

The regulator has put those firms on notice and placed them on an individual action plan to secure new professional indemnity insurance (PII) cover as soon as possible.

Around two-thirds of the 43 regulated firms covered by Enterprise secured alternative cover within the 28-day-deadline from the time of insolvency.

Crispin Passmore, SRA executive director of policy, said: 'We have been working closely with affected firms to make sure they secure cover and keep both existing and potential clients aware of the situation.

'The good news is that, within a short space of time, two-thirds of firms have reported securing new cover, with most others well into the process of getting something in place. We will continue to take a constructive approach with those who don't have a new policy, but are being absolutely clear about their responsibilities and the need to move quickly.

'We are looking at each firm on an individual basis and putting them on an action plan. If we do not see evidence of progress, we will then need to take further action.'

With Enterprise having provided PII cover since 2011, there are firms other than those with live policies that will have open claims. All claims will now be dealt with by the liquidator with the support of the Financial Services Commission.

An SRA statement read: 'The UK Financial Services Compensation Scheme has confirmed that if it establishes Enterprise cannot meet the cost of claims made against it, it will protect UK policyholders if they meet certain eligibility criteria.

'For example, this is for UK policyholders who are individuals or small businesses with a turnover of less than £1m and who have [PII].'

The regulator added that there will also be firms that have closed during this period that might have run-off insurance with Enterprise. The regulator said it has made all firms aware that there is a risk that the liquidator might disclaim the policies.

Frank Maher, partner at Legal Risk, commented: 'These firms are in a difficult position - many of those with Enterprise may have had little choice of insurer available to them, due to claims experience or other aspects of their risk profile, so they may have nowhere else to go.

'The SRA requires them to have insurance for client protection, and regrettably it follows that they cannot continue in practice if they cannot find replacement cover. That means they will trigger run-off cover, which means the liquidator may demand the run-off premium. The cover is worthless, save that the firms may be eligible to claim on the FSCS, depending on eligibility.'

Matthew Rogers is a legal reporter at Solicitors Journal @sportslawmatt matthew.rogers@solicitorsjournal.co.uk