Frank Maher, partner at Legal Risk, has welcomed the Legal Services Board (LSB) decision to reject plans to reduce the minimum level of professional indemnity insurance (PII) cover to £500,000.
The Solicitors Regulation Authority (SRA) had proposed lowering the minimum cover from £2m for firms, and £3m for incorporated firms and LLPs, to £500,000 to create more flexibility in the market. However, the LSB said in November that it was “not persuaded by the evidence put forward”.
Maher says: “There was no credible evidence that there would be any real saving and the costs of buying back cover would have been substantially more.”
He added that he was surprised to find that “nobody at the SRA or LSB seemed to have realised the bombshell revelation that the £500,000 would include claimants’ costs”.
“There was no mention of it in the SRA’s discussions. In practice it would mean that the protection given would only have amounted to about £250,000 or £300,000 if the case was contested. It is frightening that they did not appreciate this.”
Maher concludes: “It takes us back to where we were, which is that we need a full review of professional indemnity insurance. No insurance covers everything so we need to look at what is reasonable.”
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