Version 1 of the Handbook was published on 16 September 2011, and was superseded by Version 2 on 23 December 2011. For more information, click "History" above.
All firms carrying on a practice during any indemnity period beginning on or after 1 October 2011 must take out and maintain qualifying insurance under these Rules.
A solicitor or REL is not required to take out and maintain qualifying insurance under these Rules in respect of work done as an employee or whilst otherwise directly engaged in the practice of another firm (including without limitation as an appointed person), where that firm is required by these Rules to take out and maintain qualifying insurance.
A run-off firm must apply in accordance with these Rules to be issued with an ARP run-off policy.
Under these Rules, firms have a continuing obligation to ensure that they have qualifying insurance in place at all times with effect from 1 October 2011. Refer to the definitions of practice, amongst others, to establish whether a firm falls within the scope of these Rules. Firms should also check that any insurance that they take out in order to comply with these Rules (as opposed to any 'top-up' cover) is taken out with a qualifying insurer. A list of qualifying insurers appears on the website of the SRA at www.sra.org.uk, and is also available from the SRA. Contact details appear at the end of the introductory commentary.
Firms should note in particular that work carried out by an appointed person for that firm may be covered by the firm's policy, whether that person is engaged as an employee or on a contract for services.
If a firm cannot obtain a policy from a qualifying insurer it should apply to join the ARP in accordance with Part 3 of the Rules, if it is an eligible firm. If it is not an eligible firm, it must cease practice.
Note that, under the MTC, a policy, once taken out, cannot be cancelled before the end of an indemnity period unless:
The effect of cancellation in the circumstances described in (3) or (4) above is that the firm ceases to have qualifying insurance in place with effect from the cancellation, and would therefore be in breach of Rule 4.1 if it were to carry on a practice thereafter without taking out a new policy.
Most recognised bodies and licensed bodies (in respect of their regulated activities) are required to obtain cover complying with the MTC and with a sum insured of £3 million, rather than £2 million for other firms. The definition of "relevant recognised body" and "relevant licensed body" in these Rules indicates which recognised bodies and licensed bodies this requirement applies to.
The provisions of this Rule 4 shall be without prejudice to the ability of firms to include as insureds on a policy persons not required under these Rules to be insured.
Each firm carrying on a practice during any indemnity period beginning on or after 1 October 2011, and any person who is a principal of such a firm, must ensure:
that the firm has in place and maintains qualifying insurance outside the ARP during any such indemnity period;
or, in the case of an eligible firm,
that the firm has applied to enter the ARP in accordance with the procedure set out in Rule 10;
in either case before the start of any relevant indemnity period or the start of practice whichever is later.
Note that the duty to ensure that qualifying insurance is in place rests not just on the firm as a whole, but also on every principal within that firm.
A run-off firm, and any person who was a principal of that run-off firm immediately prior to it becoming a run-off firm, must ensure that the run-off firm has applied to enter the ARP in accordance with the procedure set out in Rule 13.4(a). Making such an application does not absolve any firm or person from any breach of Rule 5.1.
A firm which has continued to practise without qualifying insurance immediately prior to closing down is required to apply for run-off cover through the ARP, but the firm and any principal of the firm may still face action for a breach of Rule 5.1 for practising without qualifying insurance.
If a firm is carrying on a practice which is being provided with qualifying insurance by a qualifying insurer (whether alone or together with other qualifying insurers) and that qualifying insurer is the subject of an insolvency event then, subject to any waiver under Rule 19.1, the firm and any person who is a principal of the firm must ensure:
that the firm has in place qualifying insurance with another qualifying insurer which must be arranged as soon as may be reasonably practicable and in any event within four weeks of such an insolvency event;
that the firm applies within that period of four weeks to enter the ARP in accordance with the procedure set out in Rule 10.
It is important to be aware that the arrangements for professional indemnity insurance put in place by the SRA do not seek to protect firms against the insolvency of a qualifying insurer. If an insolvency event occurs in respect of an insurer, that insurer will cease to be a qualifying insurer for the purposes of writing new policies and firms insured by that insurer must effect alternative insurance in accordance with these Rules. This is because, in such circumstances, the insurer may not be in a position to pay claims in full. Any firm which has qualifying insurance with a qualifying insurer which is the subject of an insolvency event is required therefore to obtain replacement cover as soon as possible, and in any event within four weeks of the insolvency event occurring. Having done so, a firm should cancel the policy with the insolvent insurer and, if entitled to do so, seek a return of the premium relating to the balance of the policy period from the insurer which has become the subject of the insolvency event.
The Council may require from a firm or any principal in a firm carrying on, or reasonably believed by the Council to be carrying on, a practice such information and evidence as it may reasonably require to satisfy itself that such a firm has in place qualifying insurance.
The special provisions contained in Appendix 3 to these Rules shall apply to a firm that has at least one principal who is a REL.