You are certain to have questions before deciding where to place your Professional Indemnity insurance.
The Law Society sets out the MTC which outline the basic requirements of what needs to be included in the solicitors professional indemnity policy. The full wording of the MTC can be found at the Law Society’s website http://www.lawsociety.org.uk/ under the heading "professional indemnity insurance."
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The policy may only be cancelled:
- if the firm's practice is merged into a successor practice which has insurance cover complying with the Minimum Terms as laid down by the Law Society or
- if the firm obtains replacement insurance, complying with the Minimum Terms.
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Run off cover refers to the cover that must continue after a firm ceases to trade. If there is no successor practice, the indemnity policy must provide cover for six years as required by the Law Society’s Minimum Terms & Conditions. The cost of this cover is 225% of the premium paid for the last year of cover. Payment is due at the time the practice ceases.
If the firm wishes to renegotiate the terms of the run off cover (i.e. a different limit or excess) it will need to request this in writing for consideration by our underwriter.
At the end of the six years, the policy no longer provides cover to the firm.
We do not sell run off cover as a stand-alone product.
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Q: Are locums covered by the policy?
Yes, locums are covered by the policy. Refer to the section 'Definition of an employee' in the policy document.
If another firm is acting on your behalf as a "locum" (as is commonly the case with holiday cover for sole practitioners), your own insurance will respond to any claim arising out of the locum’s conduct, notwithstanding that the locum has insurance of its own.
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If the practice ceases and there is no successor practice then the policy provides for 6 years run-off cover commencing at the expiry of the indemnity year in which the practice ceases. There is a premium for this cover of 225% of the annual premium for the year in which you cease to practise.
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The definition of a successor practice in the Law Society’s Minimum Terms is complicated. You may be a successor practice even though you did not intend to take on the liabilities of another practice when taking it over or merging with it, and even if you specifically agreed that those liabilities would remain elsewhere.
Whenever a practice ceases "being carried on as a discrete business", there is potential for the successor practice clause to take effect.
You may become a successor practice by holding out your practice ‘expressly or by implication’ as being the successor, by incorporating the other practice(s) into your own, by taking on a majority of the principals in the other practice as principals in your firm, by taking on at least one such principal as a principal when the majority have not become principals in another practice, by taking a sole practitioner or Recognised Body into your firm as a principal, or by taking on a sole practitioner as an employee after 31 August 2000.
If your firm has done any of these things at any time, or is planning to do so, you may be a successor practice and should provide full details.
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