SRA probing 23 law firms over non-disclosure to PI insurers
Twenty-three law firms are at risk of being struck off for hiding important information from their professional indemnity (PI) insurers.
The Solicitors Regulation Authority (SRA) revealed last week that it was probing the 23 firms for non-disclosure.
The investigation will determine whether the law firms failed to give their insurers the full details they required as part of the insurance application process.
An SRA spokesman declined to give details of the investigation but said typical examples of non-disclosure include law firms failing to reveal their turnover or disciplinary history.
Firms that are proven to have deliberately misled insurers are likely to be struck off.
The SRA requires law firms to have PI insurance in place to practice.
The SRA spokesman said that non-disclosure at the 23 firms has yet to be proven. But he added: “If it is proven to be the case it is quite serious in that there could have been dishonesty issues as well as mistakes.
“It could be that the policy is invalid because the insurer might say: ‘If you had told us that, we wouldn’t have offered you a policy.’”
The SRA can issue punishments to law firms that range from a letter of rebuke to a £2,000 fine. However, the spokesman said that if a law firm was found to have deliberately misled its insurer, the regulator could refer it to the Solicitors Disciplinary Tribunal.
The spokesman said: “The tribunal has unlimited fining powers and if they think someone has been dishonest, they usually strike them off.”
He added that the SRA would publicise cases where law firms were found to have misled their insurers.
The spokesman declined to give a precise time-frame for the completion of the investigation, but said that the probe was drawing to a close.
The SRA revealed the investigations last week when it published the minutes of a public meeting of its Regulatory Risk Committee. The meeting took place on 28 April.
The minutes also show that the regulator is investigating a further 58 law firms for failing to disclose to the SRA whether they had PI insurance in place or not after the end of the Extended Policy Period (EPP) on 29 December.
The EPP runs from the solicitors’ PI renewal date of 30 September until 29 December and gives firms extra time to find PI cover. If they fail to find cover during the EPP they face closure.
The SRA also said that it intervened at two firms that did not have PI insurance at the start of April 2014.
In addition, the minutes said the regulator is considering intervention in several firms that “remain of significant concern”.