Solicitors may go out of business over insurance
IT IS likely that some solicitors’ firms will be forced out of business in December through inability to obtain professional indemnity insurance, according to the director general of the Law Society.
Ken Murphy told The Irish Times that a number of measures had been taken recently by the society to modify the compulsory indemnity requirements, and it was hoped that quotes would be issued shortly to firms.
The changes include a reduction of the minimum cover per transaction from €2.5 to €1.5 million, and the reduction of the “run-on” period, whereby retiring solicitors have to continue with their insurance, from six years to two.
Another reform, insisted upon by prospective insurers, was the closure of the assigned risks pool (ARP), which offered a safety net of cover to solicitors unable to obtain cover because of their recent claims history. The ARP cover gave them time to work their way back to insurability.
Now, however, if solicitors cannot obtain insurance there is no safety net, and this will leave them uninsured when the deadline for next year expires on December 1st, Mr Murphy said. Solicitors cannot obtain a practising certificate without insurance, so they will be unable to practise.
The main provider of cover to solicitors is the Solicitors’ Mutual Defence Fund, which has about 60 per cent of the market. Earlier this year it was rumoured that insurance premiums would increase two- or even three-fold for next year.
This was because of the high number of big claims against solicitors, arising out of the activities of certain solicitors, for example Michael Lynn, which exposed financial institutions to large losses. Another cause of the rise in premiums was the losses all insurance companies had incurred with their investments.
The defence fund, for example, lost almost €8 million on a bond. Proceedings are about to issue in connection with the advice it received on the purchase of the bond, and that is expected to be heard in the Commercial Court next year, according to its executive director, Laurence Shields.
A Law Society taskforce has been engaging with other insurers to persuade them to enter the market, and Mr Murphy said a number of companies were now likely to offer quotes.
However, while insurers have been sending out proposal forms, these have not resulted in offers of quotes, according to solicitors contacted by The Irish Times. “I got five unsolicited proposal forms, but no quote so far,” said one.