SRA Indemnity Rules 2011 - Indemnity cover
Version 1 (Superseded)

Version 1 of the Handbook was published on 16 September 2011, and was superseded by Version 2 on 23 December 2011. For more information, click "History" above.

Part 2: Indemnity cover

Rule 8: Indemnity

Indemnity for ceased practices
8.1

Any member of a previous practice which ceased on or before 31 August 2000 who has at any time been either:

(a)

an assured as a result of the issue of a certificate under one or more of the master policies, or

(b)

a person entitled to be indemnified by virtue of the issue of a receipt under the Solicitors' Indemnity Rules 1987-1990 or a payment of Contribution and Value Added Tax thereon as stated in the Solicitors' Indemnity Rules 1991-1999,

and who is not, at the time during the indemnity period when a claim is first made or intimated against him or her or when circumstances which might give rise to such a claim are first notified by him or her to Solicitors Indemnity Fund Limited, a person entitled or required to be indemnified in respect of claims arising from that previous practice by a policy of qualifying insurance or otherwise under the SIIR,

and the previous practice

shall be entitled to indemnity out of the fund in the manner, to the extent and subject to the conditions and exclusions set out in these Rules against:

(c)

all loss (including liability for third party claimants' costs) incurred by the previous practice or any member thereof at any time arising directly from:

(i)

any claim(s) first made or intimated against the previous practice or any member thereof during the indemnity period in respect of any description of civil liability whatsoever which may have been incurred in private practice by the previous practice or by a member as a member of such previous practice;

(ii)

any claim in respect of any such description of civil liability as aforesaid, made or intimated against the previous practice or any member thereof, whether during or subsequent to the indemnity period arising out of circumstances notified to Solicitors Indemnity Fund Limited during the indemnity period as circumstances which might give rise to such a claim; and

(d)

all costs and expenses incurred with the consent of Solicitors Indemnity Fund Limited (such consent not to be unreasonably withheld) in the defence or settlement or compromise of any such claim as aforesaid.

Eligible former principals
8.2

Rule 8.1 shall apply in addition in respect of any principal of a previous practice that is an eligible former principal.

8.3

In respect of any claim referred to in Rule 8.2 made by an eligible former principal, the extent of the indemnity (if any) to be provided by Solicitors Indemnity Fund Limited shall be limited to an amount equal to the lesser of:

(a)

the Due Proportion of the Deductible (excluding any Penalty Deductible) in respect of the eligible former principal that would have been disregarded by Solicitors Indemnity Fund Limited in relation to the claim had it been made under the Solicitors' Indemnity Rules 1999; and

(b)

such amount if any which the relevant successor practice is entitled to and seeks to recover from the eligible former principal in relation to the claim.

8.4

For the purposes of Rule 8.3, "Due Proportion", "Deductible" and "Penalty Deductible" shall have the meanings respectively given to them by the Solicitors' Indemnity Rules 1999, as set out in Schedule 1 to these Rules.

Expired run-off claims
8.5

Any firm or person shall be entitled to indemnity out of the fund in the manner, to the extent and subject to the conditions and exclusions set out in this Rule 8.5, in relation to an expired run-off claim, provided that:

(a)

such claim is first notified to Solicitors Indemnity Fund Limited at any time between 1 September 2007 and 30 September 2017; and

(b)

there is no preceding qualifying insurance which provides cover for such claim; and

(c)

such claim does not relate to or arise out of any claim first made against an insured or circumstances first notified to the provider of such preceding qualifying insurance, in either case at a time when such preceding qualifying insurance was required to provide cover in respect thereof; and

(d)

such person was an insured under the relevant preceding qualifying insurance.

Notwithstanding any other provision of these Rules:

(e)

the obligations of the fund and/or any insured in respect of an expired run-off claim shall be in accordance with, and limited to, the expired run-off cover; and

(f)

any obligation owed by any insured under the preceding qualifying insurance to the qualifying insurer which issued such insurance shall be deemed to be owed to Solicitors Indemnity Fund Limited in place of such qualifying insurer, unless and to the extent that Solicitors Indemnity Fund Limited in its absolute discretion otherwise agrees.

Rule 9: Exclusions from cover

9.1

The fund shall not afford any indemnity in respect of any loss arising out of any claim:

(a)

for death, bodily injury, physical loss or physical damage to property of any kind whatsoever (other than property in the care, custody and control of the previous practice or member thereof in connection with its, his or her private practice for which it, he or she is responsible, not being property occupied or used by it, him or her for the purposes of the previous practice);

(b)

for any alleged breach or other relief in respect of any partnership or partnership agreement between the principals in the previous practice or between any principal therein and any other person as principals in any other previous practice;

(c)

for wrongful dismissal or termination of articles of clerkship or training contract or any other alleged breach or any other relief by either party in respect of any contract of employment by the previous practice or any member thereof; and/or for wrongful termination or any other alleged breach or any other relief by either party in respect of any contract for supply to or use by the previous practice or any member thereof of services and/or materials and/or equipment and/or other goods;

(d)

for the payment of a trading debt incurred by the previous practice or any member thereof;

(e)

in respect of any undertaking given by any principal in the previous practice or by a recognised body or licensed body or on his, her or its behalf (whether in his, her or its own name or in the name of the previous practice) to any person in connection with the provision of finance, property, assistance or other advantage whatsoever to or for the benefit of such principal or any other principal or of his or her or any other principal's spouse or children or of such recognised body or licensed body or of any business, firm, company, enterprise, association or venture owned or controlled by him, her or it or any other principal or in a beneficial capacity whether alone or in concert with others, EXCEPT to the extent that the person seeking indemnity shall establish that he, she or it was unaware that the undertaking was or was likely to be connected with the provision of any such finance, property, assistance or other advantage;

(f)

in respect of any dishonest or fraudulent act or omission, but nothing in this exclusion shall prevent any particular member of the previous practice who was not concerned in such dishonesty or fraud being indemnified in accordance with these Rules in respect of any loss arising out of any claim in respect of any dishonest or fraudulent act or omission by any other such member;

(g)

in respect of any liability incurred in connection with an overseas practice. In relation to a previous practice having any overseas offices deemed by paragraph (ii) of the definition of separate practice in Rule 3.1 to form a separate practice, a liability shall be deemed to have been incurred in connection with the office where or from which the major part of the work out of which the loss arose in respect of which indemnity is sought was being done. In the event of doubt as to which (if any) office satisfies this requirement, the liability shall be deemed to have been incurred in connection with the office to which the person who accepted the initial instructions was most closely connected;

(h)

in respect of any liability incurred in connection with a previous practice in relation to which the obligation to pay contribution has been exempted under Rule 27 of the Solicitors' Indemnity Rules 2006 (or any earlier corresponding Rule) or, unless otherwise provided by the terms of the waiver, waived by the Council under Rule 19 (or under any corresponding earlier Rule);

(i)

arising out of any circumstances or occurrences which have been notified under the master policy or any certificate issued under the master policy or any other insurance existing prior to 1 September 1987;

(j)

in respect of any adjustment by way of claims loading or loss of discount which may at any future date or in respect of any future period be made by reference to any claim or claims first made or intimated during any indemnity period;

(k)

in respect of any liability incurred by any person in his, her or its capacity as a shareholder or beneficial owner of a share in a body corporate that is either a recognised body or licensed body notwithstanding the definition of principal in Rule 3.1;

(l)

in respect of any act or omission on the part of any principal whilst acting on behalf of the previous practice or any member thereof in connection with any matter affecting the business of the previous practice provided that at the time of such act or omission such principal was a principal in the previous practice;

(m)

where the previous practice or any member thereof is entitled to indemnity under any insurance except in respect of any amount greater than the amount which would have been payable under such insurance in the absence of the indemnity provided by the fund.

9.2

For the avoidance of doubt, any claim or claims by any member or former member of any previous practice against any member or former member of any such previous practice for the payment of the whole or any part of the deductible paid or due in respect of a claim already notified or made under these Rules or any previous Rules is not a loss arising within the meaning of Rule 8 and shall in no event be recoverable hereunder.

9.3

The exclusions set out in this Rule 9 shall not apply in relation to an expired run-off claim, in respect of which the provisions of Rule 8.5 shall apply.

Rule 10: Manner of indemnity

10.1

Such indemnity shall be provided, according to the decision of Solicitors Indemnity Fund Limited as set out in Rule 10.2, in any one or any combination of the following ways:

(a)

by payment, in or towards satisfaction of the claim and/or claimant's costs and expenses, to or to the order of the claimant making the claim;

(b)

by payment, in respect of the claim and/or claimant's costs and expenses and/or costs and expenses incurred in respect of the defence or settlement or compromise of the claim, to or to the order of the person against whom the claim is made;

(c)

by payment, in or towards discharge of costs and expenses incurred in respect of the defence or settlement or compromise of the claim, to or to the order of the legal advisers, adjusters or other persons by whom or in respect of whose services such costs and expenses were incurred;

(d)

by payment to any firm or person in relation to an expired run-off claim who was an insured under the relevant preceding qualifying insurance.

10.2

Solicitors Indemnity Fund Limited shall in any particular case, and notwithstanding the insolvency or bankruptcy of any person for whom indemnity is provided, have the sole and absolute right to decide in which way or combination of ways indemnity is provided.

Rule 11: Source of indemnity

11.1

Any such indemnity shall be provided and any claim thereto shall lie and be made exclusively out of and against the fund.

11.2

Solicitors Indemnity Fund Limited shall have no obligation to provide indemnity save to the extent that the same can be provided out of the fund.

11.3

In no circumstances shall any claim to indemnity lie or be made against the Society or the Council or the Legal Services Board.

11.4

Save as provided in Rule 21, the fund shall be available exclusively for the purpose specified in Rule 4.2.

11.5

In no circumstances shall the fund or any part thereof be available or be treated by any person as available (whether by virtue of any claim, attachment, execution or proceeding or otherwise howsoever) for or in connection with any other purpose.

Rule 12: Maximum liability of the fund

12.1

The liability of the fund as stated in Rule 8.1(c) shall in no event exceed in respect of each such claim the indemnity limit for the relevant indemnity period.

12.2

All claims arising from the same act or omission (whether or not made or intimated or arising out of circumstances notified during the same indemnity period and whether or not involving the same or any number of different practices or previous practices and/or members of such practices or previous practices) shall be regarded as one claim.

12.3

If a payment exceeding the indemnity limit is made to dispose of any such claim (or, in circumstances within Rule 12.2, claims) for loss (including claimants' costs) such as stated in Rule 8.1(c), then any liability of the fund for costs and expenses under Rule 8.1(d) shall be limited to such proportion of such costs and expenses as the indemnity limit bears to the amount of the payment so made.

12.4

The provisions of this Rule 12 shall not apply in relation to an expired run-off claim, in respect of which the provisions of Rule 8.5 shall apply.

Rule 13: Indemnity limit

13.1

Save in relation to an expired run-off claim, in respect of which the provisions of Rule 8.5 shall apply, the indemnity limit shall be £1,000,000 each and every claim (including claimants' costs).

Rule 14: Conditions

14.1

The previous practice and each member thereof shall procure that notice to Solicitors Indemnity Fund Limited shall be given in writing as soon as practicable of:

(a)

any claim(s) the subject of Rule 8 made or intimated during the relevant indemnity period against it, him or her of any claim for or likely to be for more than £500; or

(b)

the receipt by it, him or her of notice of any intention to make any such claim(s).

14.2

The previous practice and any member thereof may also give notice in writing to Solicitors Indemnity Fund Limited of any circumstances of which it, he or she shall become aware which may (whether during or after the relevant indemnity period) give rise to any such claim(s).

14.3

Any notice given under Rule 14.2, will be effective only if, at the date when such notice was given, the circumstances known to and notified by the previous practice and/or member thereof, represent sufficient ground for a genuine and reasonable supposition on the part of the previous practice or member that those circumstances may give rise to a claim the subject of indemnity under Rule 8.

14.4

If notice is given to Solicitors Indemnity Fund Limited under Rule 14.1(b) or 14.2, any claim subsequently made (whether during or after the relevant indemnity period) pursuant to such an intention to claim or arising from circumstances so notified shall be deemed to have been made at the date when such notice was given.

14.5

The previous practice and each member thereof shall not admit liability for, or settle, any claim falling within Rule 8 or incur any costs or expenses in connection therewith without the prior consent of Solicitors Indemnity Fund Limited (such consent not to be unreasonably withheld).

14.6

Subject to Rule 14.7:

(a)

the previous practice and each member thereof shall procure that Solicitors Indemnity Fund Limited shall be entitled at the fund's own expense at any time to take over the conduct in the name of the previous practice or member of the defence or settlement of any such claim, including any claim in respect of which the previous practice or member may become entitled to partial indemnity under any insurance with any insurers; and

(b)

Solicitors Indemnity Fund Limited may after taking over the defence or settlement of any such claim conduct the same as it may in its absolute discretion think fit notwithstanding any dispute or difference, whether or not referred to arbitration under Rule 15, which may exist or arise between it and the previous practice or member.

14.7

No previous practice or member thereof shall be required to contest any legal proceedings unless a Queen's Counsel (to be mutually agreed upon or failing agreement to be appointed by the President of the Society for the time being) shall advise that such proceedings should be contested.

14.8

Without prejudice to Rules 14.5, 14.6 and 14.7, the previous practice and each member thereof shall keep Solicitors Indemnity Fund Limited informed in writing at all times, whether or not Solicitors Indemnity Fund Limited shall specifically so request, as to the development and handling of any claim, intimated claim, notice or circumstances the subject of or arising subsequent to any notice given to Solicitors Indemnity Fund Limited under Rule 14.1 or 14.2; and shall consult and co-operate with Solicitors Indemnity Fund Limited in relation thereto as Solicitors Indemnity Fund Limited may request, whether or not Solicitors Indemnity Fund Limited shall take over the conduct thereof.

14.9

The fund waives any rights of subrogation against any member of the previous practice save where those rights arise in connection with

(a)

a dishonest or criminal act by that member; or

(b)

the provision of indemnity under the exception to Rule 9.1(e); or

(c)

a claim to indemnity in circumstances where that member has received a net benefit to which he or she was not entitled as a consequence of another member being provided with indemnity out of the fund;

and save as otherwise expressly provided in these Rules.

14.10

If the previous practice or any member thereof shall prefer any claim to indemnity out of the fund knowing the same to be false or fraudulent as regards amount or otherwise, it, he or she shall forfeit any claim to any such indemnity in respect of any claim or future claim against the previous practice or member to which the false or fraudulent claim to indemnity out of the fund may have related or relate.

14.11

Where there has been a failure to pay any instalment of any contribution due or any Value Added Tax payable in accordance with the Solicitors' Indemnity Rules 1987 to 2007 or the SRA Indemnity Rules 2011 and a claim has been made or intimated against the previous practice or any member thereof in respect of which such previous practice or member would otherwise have been entitled to be provided with indemnity, Solicitors Indemnity Fund Limited shall provide such indemnity by payment (up to the indemnity limit) in or towards satisfying, or enabling the previous practice or member concerned to satisfy, the claim and claimants' costs and such previous practice shall thereafter upon request reimburse to Solicitors Indemnity Fund Limited on behalf of the fund the whole or such part as Solicitors Indemnity Fund Limited may request of any payment so made and of any costs and expenses incurred in its defence, settlement or compromise, and each principal therein shall be jointly and severally responsible to Solicitors Indemnity Fund Limited for such reimbursement accordingly. Provided always that Solicitors Indemnity Fund Limited shall require such reimbursement only to the extent of (a) any increase which in its opinion may have occurred in the total payable out of the fund (including costs and expenses) as a result of such failure, together with (b) such amount as may be necessary to satisfy any unpaid contribution and Value Added Tax and interest thereon at the rate of 4% above Barclays Bank base rate with quarterly rests or at such other rate as the Society may from time to time publish in the Law Society's Gazette.

14.12

Where non-compliance with any provision of these Rules by any previous practice or any member thereof claiming to be entitled to indemnity out of the fund has resulted in prejudice to the handling or settlement of any claim in respect of which such previous practice or member is entitled to indemnity hereunder, such previous practice or member shall reimburse to Solicitors Indemnity Fund Limited on behalf of the fund the difference between the sum payable out of the fund in respect of that claim and the sum which would have been payable in the absence of such prejudice. Provided always that it shall be a condition precedent of the right of the fund to such reimbursement that it shall first have provided full indemnity for such previous practice or member by payment (up to the indemnity limit) in or towards satisfying, or enabling such previous practice or member to satisfy, the claim and claimants' costs in accordance with the terms hereof.

14.13

In respect of any loss arising from any claim or claims as described by Rule 8.1(c) arising out of any dishonest or fraudulent act or omission of any member of the previous practice, the fund shall nonetheless be available to afford indemnity in accordance with these Rules to the previous practice and any member thereof, other than and excluding in each case the particular member concerned in such dishonesty or fraud. Provided always that at the request of Solicitors Indemnity Fund Limited, the previous practice or member being indemnified shall:

(a)

take or procure to be taken at the fund's expense all reasonable steps to obtain reimbursement for the benefit of the fund from or from the personal representatives of any such member concerned in such dishonesty or fraud, and

(b)

procure that any reimbursement so obtained together with any monies which but for such fraud or dishonesty would be due to such member concerned in such dishonesty or fraud shall be paid to the fund up to but not exceeding the amounts paid by the fund in respect of such claim together with any expenditure reasonably incurred by the fund in obtaining such reimbursement.

14.14

In the event of indemnity being afforded under the exception to Rule 9.1(e), the previous practice or member being indemnified shall take or procure to be taken at the fund's expense all reasonable steps to obtain reimbursement for the benefit of the fund from any person to whom any benefit arising from the giving of any undertaking accrues in the circumstances set out in Rule 9.1(e). Provided always that such reimbursement shall not exceed:

(a)

the amount paid by the fund by way of indemnity together with any expenditure reasonably incurred by the fund in obtaining such reimbursement, or

(b)

the amount of any benefit accruing to such person,

whichever is the lesser.

14.15

In respect of any claim to indemnity, Solicitors Indemnity Fund Limited may appoint panel solicitors to act on its behalf and on behalf of the previous practice or any member thereof, and panel solicitors shall:

(a)

act at the sole direction of the fund for any purpose falling within the scope of these Rules, including acting on the Court record for the previous practice or any member thereof, and

(b)

disclose to Solicitors Indemnity Fund Limited as required any statement or information given to or which becomes known to panel solicitors in the course of so acting, and such disclosure shall be treated as having been made directly to Solicitors Indemnity Fund Limited by the previous practice or member.

14.16

The provisions of this Rule 14 shall not apply in relation to an expired run-off claim, in respect of which the provisions of Rule 8.5 shall apply.

Rule 15: Arbitration

15.1

Any dispute or difference concerning any claim or the quantum of any claim to be provided with indemnity in accordance with these Rules shall be referred to the sole arbitrament, which shall be final and binding, of a person to be appointed on the application of either party in default of agreement by the President of the Society for the time being. Any such arbitration shall take place and be conducted between, on the one hand, the person for whom indemnity is provided, the party to the dispute or difference and, on the other hand, Solicitors Indemnity Fund Limited for and in respect of the fund.