Conveyancing solicitors with unrated cover will be thrown off panel
The Yorkshire Building Society (YBS) has demanded that all solicitors on its conveyancing panel have insurance with a minimum B+ rated carrier before 1 October.
If the solicitors are insured by an unrated firm they risk being thrown off YBS’s panel.
The building society, which is one of the largest in the UK, said the move had been prompted by the recent collapses of professional indemnity insurers such as Quinn and Lemma.
Its conveyancing panel service is used by its customers to find a solicitor for their home purchase, sale, remortgage or transfer of equity.
A YBS spokeswoman added: “With the recent financial collapses of professional indemnity insurance (PII) providers, we decided to require all applicants to our conveyancing panel who take out insurance on the open market to have PII cover with an insurer with a minimum financial security rating of AM Best B+ or Standard and Poor’s A.
“We are not actively removing existing firms from the panel prior to 1 October unless they need to reapply for membership and are not insured appropriately.”
A spokeswoman for the Council of Mortgage Lenders (CML) said the risk for the lender could be if they wanted to claim against a solicitor for inadequate work and they couldn’t because the insurance was not there for them to claim against.
“Deciding which insurers are acceptable to a lender would be a commercial matter for the individual lender, and not a matter on which the CML would be involved,” she added.
Other lenders could follow suit
Howden director of PI John Wooldridge told Insurance Times he expects other lenders to follow suit because they could see it as a “good risk management” step to protect themselves against an unrated insurer collapsing.
“They will look at the building society’s concerns of the unrated insurer being unable to meet their commitments and leaving the law firm in the lurch. I think this is the start of a chain,” he said.
“Lenders are also going to look at the SRA’s failure in the last consultation to get rid of unrated insurers and impose their own requirements on the profession that will make it far more difficult for unrated insurers to operate.”