SRA Minimum Terms and Conditions of Professional Indemnity Insurance

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You are reading current version in effect from 25 November 2019

Guidance

Guidance

The Insurance Act 2015 - Guidance

Guidance: To help you understand changes to the minimum terms and conditions of solicitors’ professional indemnity insurance which came into force in August 2016.

Glossary terms

insured

means each person and entity named or described as a person to whom the insurance extends and includes, without limitation, those referred to in clause 1.3 in the MTC

private legal practice

means the provision of services in private practice as a solicitor or REL in an authorised body including, without limitation:

  1. providing such services in England, Wales or anywhere in the world in a recognised sole practice, a recognised body or a licensed body (in respect of an activity regulated by the SRA in accordance with the terms of the body's licence);
  2. the provision of such services as a secondee of the insured firm;
  3. any insured acting as a personal representative, trustee, attorney, notary, insolvency practitioner or in any other role in conjunction with a practice;
  4. the provision of such services by any employee; and
  5. the provision of such services pro bono;

but does not include:

  1. discharging the functions of any of the following offices or appointments:
    1. judicial office;
    2. Under Sheriffs;
    3. members and clerks of such tribunals, committees, panels and boards as the Council may from time to time designate but including those subject to the Tribunals and Inquiries Act 1992, the Competition Commission, Legal Services Commission Review Panels, Legal Aid Agency Review Panels and Parole Boards;
    4. Justices' Clerks; or
    5. Superintendent Registrars and Deputy Superintendent Registrars of Births, Marriages and Deaths and Registrars of Local Crematoria

 

insured firm's practice

means:

  1. the legal practice carried on by the insured firm as at the commencement of the period of insurance; and
  2. the continuous legal practice preceding and succeeding the practice referred to in paragraph (i) (irrespective of changes in ownership of the practice)

 

prior practice

means each practice to which the insured firm's practice is ultimately a successor practice by way of one or more mergers, acquisitions, absorptions or other transitions, but does not include any such practice which has elected to be insured under run-off cover in accordance with clause 5.5 of the MTC

successor practice
  1. means a practice identified in this definition as 'B', where:
    1. 'A' is the practice to which B succeeds; and
    2. 'A's owner' is the owner of A immediately prior to transition; and
    3. 'B's owner' is the owner of B immediately following transition; and
    4. 'transition' means merger, acquisition, absorption or other transition which results in A no longer being carried on as a discrete legal practice.
  2. B is a successor practice to A where:
    1. B is or was held out, expressly or by implication, by B's owner as being the successor of A or as incorporating A, whether such holding out is contained in notepaper, business cards, form of electronic communications, publications, promotional material or otherwise, or is contained in any statement or declaration by B's owner to any regulatory or taxation     authority; and/or
    2. (where A's owner was a sole practitioner and the transition occurred on or before 31 August 2000) - the sole practitioner is a principal of B's owner; and/or
    3. (where A's owner was a sole practitioner and the transition occurred on or after 1 September 2000) - the sole practitioner is a principal or employee of B's owner; and/or
    4. (where A's owner was a recognised body or a licensed body (in respect of an activity regulated by the SRA in accordance with the terms of the body's licence)) - that body is a principal of B's owner; and/or
    5. (where A's owner was a partnership) - the majority of the principals of A's owner have become principals of B's owner; and/or
    6. (where A's owner was a partnership and the majority of principals of A's owner did not become principals of the owner of another legal practice as a result of the transition) - one or more of the principals of A's owner have become principals of B's owner and:
      1. B is carried on under the same name as A or a name which substantially incorporates the name of A (or a substantial part of the name of A); and/or
      2. B is carried on from the same premises as A; and/or
      3. the owner of B acquired the goodwill and/or assets of A; and/or
      4. the owner of B assumed the liabilities of A; and/or
      5. the majority of staff employed by A's owner became employees of B's owner.
  3. notwithstanding the foregoing, B is not a successor practice to A under paragraph (b) (ii), (iii), (iv), (v) or (vi) if another practice is or was held out by the owner of that other practice as the successor of A or as incorporating A, provided that there is insurance complying with the MTC in relation to that other practice

 

 

claim

means a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages. For these purposes, an obligation on an insured firm and/or any insured to remedy a breach of the SRA Accounts Rules, or any rules which replace them in whole or in part, shall be treated as a claim, and the obligation to remedy such breach shall be treated as a civil liability for the purposes of clause 1 of the MTC, whether or not any person makes a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages as a result of such breach, except where any such obligation may arise as a result of the insolvency of a bank (as defined in section 87 of the SA) or a building society which holds client money in a client account of the insured firm or the failure of such bank or building society generally to repay monies on demand

period of insurance

means the period for which the insurance operates

circumstances

means an incident, occurrence, fact, matter, act or omission which may give rise to a claim in respect of civil liability.

insurer

means:

  1. for the purposes of the SRA Financial Services (Conduct of Business) Rules 2001 a firm with permission to effect or carry out contracts of insurance (other than a bank); and
  2. for the purposes of the SRA Indemnity Insurance Rules and the MTC the underwriter(s) of the insurance

 

defence costs

means legal costs and disbursements and investigative and related expenses reasonably and necessarily incurred with the consent of the insurer in:

  1. defending any proceedings relating to a claim; or
  2. conducting any proceedings for indemnity, contribution or recovery relating to a claim; or
  3. investigating, reducing, avoiding or compromising any actual or potential claim; or
  4. acting for any insured in connection with any investigation, inquiry or disciplinary proceeding (save in respect of any disciplinary proceeding under the authority of the SRA or the Tribunal),

and does not include any internal or overhead expenses of the insured firm or the insurer or the cost of any insured's time.
 

 

SRA

means the Solicitors Regulation Authority

Tribunal

means the Solicitors Disciplinary Tribunal which is an independent statutory tribunal constituted under section 46 of the SA

insured firm

means the authorised body which contracted with the insurer to provide the insurance

company

means a company incorporated in a state to which the Establishment of Lawyers Directive 98/5/EC applies and registered under the Companies Acts or a societas Europaea

principal

means:

  1. where the authorised body is or was:
    1. a recognised sole practice - the sole practitioner;
    2. a partnership - each partner;
    3. a company with a share capital - each director of that company and any person who:
      1. is held out as a director; or
      2. beneficially owns the whole or any part of a share in the company; or
      3. is the ultimate beneficial owner of the whole or any part of a share in the company;
    4. a company without a share capital - each director of that company and any person who:
      1. is held out as a director; or
      2. is a member of the company; or
      3. is the ultimate owner of the whole or any part of a body corporate or other legal person which is a member of the company;
    5. an LLP - each member of that LLP, and any person who is the ultimate owner of the whole or any part of a body corporate or other legal person which is a member of the LLP;
  2. where a body corporate or other legal person is a partner in the authorised body, any person who is within paragraph (a)(iii) of this definition (including sub-paragraphs (A) and (C)), paragraph (a)(iv) of this definition (including sub-paragraphs (A) and (C)), or paragraph (a)(v) of this definition

 

person

includes a body of persons (corporate or unincorporated)

employee

means an individual who is:

  1. engaged under a contract of service by a person, firm or organisation or its wholly owned service company;
  2. engaged under a contract for services, made between a firm or organisation and:
    1. that individual;
    2. an employment agency; or
    3. a company which is not held out to the public as providing legal services and is wholly owned and directed by that individual, or

under which the person, firm or organisation has exclusive control over the individual's time for all or part of the individual's working week, save that:

  1. for the purposes of the SRA Financial Services (Scope) Rules, means an individual who is employed in connection with the firm's regulated financial services activities under a contract of service or under a contract for services such that he or she is held out as an employee or consultant of the firm
  2. for the purposes of the SRA Indemnity Insurance Rules and the MTC, means any person other than a principal:
    1. employed or otherwise engaged in the insured firm's practice (including under a contract for services) including, without limitation, as a solicitor, lawyer, trainee solicitor or trainee lawyer, consultant, associate, locum tenens, agent, appointed person, office or clerical staff member or otherwise;
    2. seconded to work in the insured firm's practice; or
    3. seconded by the insured firm to work elsewhere,

    but does not include any person who is engaged by the insured firm under a contract for services in respect of any work where that person is required, whether under the SRA Indemnity Insurance Rules or under the rules of any other professional body, to take out or to be insured under separate professional indemnity insurance in respect of that work

and the term "employer" is to be construed accordingly

Legal Ombudsman

means the scheme administered by the Office for Legal Complaints under Part 6 of the LSA

LSA

means the Legal Services Act 2007

sum insured

means the insurer's limit of liability under a policy in respect of any one claim (exclusive of defence costs)

relevant recognised body

means a recognised body other than:

  1. an unlimited company, or an overseas company whose members' liability for the company's debts is not limited by its constitution or by the law of its country of incorporation; or
  2. a nominee company only, holding assets for clients of another practice; and
    1. it can act only as agent for the other practice; and
    2. all the individuals who are principals of the recognised body are also principals of the other practice; and
    3. any fee or other income arising out of the recognised body accrues to the benefit of the other practice; or
  3. a partnership in which none of the partners is a limited company, an LLP or a legal person whose members have limited liability; or
  4. a sole practitioner that is a recognised body

 

relevant licensed body

means a licensed body other than:

  1. an unlimited company, or an overseas company whose members' liability for the company's debts is not limited by its constitution or by the law of its country of incorporation; or
  2. a nominee company only, holding assets for clients of another practice; and
    1. it can act only as agent for the other practice; and
    2. all the individuals who are principals of the licensed body are also principals of the other practice; and
    3. any fee or other income arising out of the licensed body accrues to the benefit of the other practice; or
    4. a partnership in which none of the partners is a limited company, an LLP or a legal person whose members have limited liability

 

 

participating insurer

means an authorised insurer which has entered into a participating insurer's agreement with the SRA which remains in force for the purposes of underwriting new business at the date on which the relevant contract of qualifying insurance is made

lead insurer

means the insurer named as such in the contract of insurance in accordance with clause 2.6 of the MTC

excess

means the first amount of a claim which is not covered by the insurance

MTC

means the minimum terms and conditions with which a policy of qualifying insurance is required by the SRA Indemnity Insurance Rules to comply, a copy of which is annexed as an annex 1 to those rules.

claimant

means:

  1. a person making a claim to statutory trust monies; and
  2. in the SRA Indemnity Insurance Rules and the MTC, a person or entity which has made or may make a claim including a claim for contribution or indemnity
policy

means:

  1. for the purposes of the SRA Financial Services (Conduct of Business) Rules 2001 the meaning given in the FCA Handbook; and
  2. for the purposes of the SRA Indemnity Insurance Rules and the MTC a contract of professional indemnity insurance made between one or more persons, each of which is a participating insurer, and an authorised body
qualifying insurance

means a policy that provides professional indemnity insurance cover in accordance with the MTC but only to the extent required by the MTC

policy period

means the period of insurance in respect of which risks may attach under a policy, but excluding the extended policy period and the cessation period

extended policy period

means the period commencing at the end of the policy period and ending on the date which is the earlier to occur of:

  1. the date, if any, on which the firm obtains a policy of qualifying insurance incepting on and with effect from the day immediately following the expiration of the policy period;
  2. the date which is 30 days after the end of the policy period; or
  3. the date on which the insured firm's practice ceases

 

cessation period

means the period commencing on the expiry of the extended policy period where, during the extended policy period the relevant authorised body has not ceased practice or obtained a policy of qualifying insurance incepting with effect on and from the day immediately following expiration of the policy period, and ending on the date which is the earlier to occur of:

  1. the date, if any, on which the authorised body obtains a policy of qualifying insurance incepting with effect on and from the day immediately following expiration of the policy period;
  2. the date which is 90 days after the commencement of the extended policy period; or
  3. the date on which the insured firm's practice ceases
participating insurer's agreement

means an agreement in such terms as the SRA may prescribe setting out the terms and conditions on which a participating insurer may provide professional indemnity insurance to solicitors and others in private legal practice in England and Wales

practice

means the whole or such part of the private legal practice of an authorised body as is carried on from one or more offices in England and Wales

indemnity period

means in the SRA Indemnity Insurance Rules and the MTC, the period of one year starting on 1 September 2000, 2001 or 2002, the period of 13 calendar months starting on 1 September 2003, or the period of one year starting on 1 October in any subsequent calendar year

cessation

means where the insured firm's practice ceases during the period of insurance or after the period of insurance in circumstances where the insured firm has not obtained insurance complying with the MTC and incepting on and with effect from the day immediately following the expiry of the policy period

non-SRA firm

means a sole practitioner, partnership, LLP or company which is not authorised to practise by the SRA, and which is either:

  1. authorised or capable of being authorised to practise by another approved regulator; or
  2. not capable of being authorised to practise by any approved regulator
authorised non-SRA firm

means a firm which is authorised to carry on legal activities as defined in section 12 of the LSA by an approved regulator other than the SRA

approved regulator

means any body listed as an approved regulator in paragraph 1 of Schedule 4 to the LSA or designated as an approved regulator by an order under paragraph 17 of that Schedule

partnership

means a body that is not a body corporate in which persons are, or are held out as, partners

LLP

means a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000

director

means a director of a company; and in relation to a societas Europaea includes:

  1. in a two-tier system, a member of the management organ and a member of the supervisory organ; and
  2. in a one-tier system, a member of the administrative organ
member

means:

  1. in relation to a company, a person who has agreed to be a member of the company and whose name is entered in the company's register of members; and
  2. in relation to an LLP, a member of that LLP
recognised body

means a body recognised by the SRA under section 9 of the AJA

licensed body

means a body licensed by the SRA under section 71(2) of the LSA in accordance with the SRA Authorisation of Firms Rules

existing instructions

means instructions to carry out legal activities as defined in section 12 of the LSA received by an authorised body from a client, which the body has accepted, on terms that have been agreed by the client, prior to the body becoming subject to cover under the cessation period

regulatory arrangements

has the meaning given to it by section 21 of the LSA

sole practitioner

means a solicitor or a REL who is the sole principal in a practice (other than an incorporated practice)

partner

means a person who is or is held out as a partner in a partnership