The SRA Handbook is no longer in effect. It was replaced by the SRA Standards and Regulations on 25 November 2019.

SRA Handbook

Obligation to effect insurance

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Version 3 of the Handbook was published on 20/04/2012. For more information, please click 'History' Above

Rule 4: Obligation to effect insurance

4.1: All firms carrying on a practice during any indemnity period beginning on or after 1 October 2011 must take out and maintain qualifying insurance under these Rules.
4.2: A solicitor or REL is not required to take out and maintain qualifying insurance under these Rules in respect of work done as an employee or whilst otherwise directly engaged in the practice of another firm (including without limitation as an appointed person), where that firm is required by these Rules to take out and maintain qualifying insurance.
4.3: A run-off firm must apply in accordance with these Rules to be issued with an ARP run-off policy.

Commentary:

Under these Rules, firms have a continuing obligation to ensure that they have qualifying insurance in place at all times with effect from 1 October 2011. Refer to the definitions of practice, amongst others, to establish whether a firm falls within the scope of these Rules. Firms should also check that any insurance that they take out in order to comply with these Rules (as opposed to any 'top-up' cover) is taken out with a qualifying insurer. A list of qualifying insurers appears on the website of the SRA at www.sra.org.uk, and is also available from the SRA. Contact details appear at the end of the introductory commentary.

Firms should note in particular that work carried out by an appointed person for that firm may be covered by the firm's policy, whether that person is engaged as an employee or on a contract for services.

If a firm cannot obtain a policy from a qualifying insurer it should apply to join the ARP in accordance with Part 3 of the Rules, if it is an eligible firm. If it is not an eligible firm, it must cease practice.

Note that, under the MTC, a policy, once taken out, cannot be cancelled before the end of an indemnity period unless:

the policy is an ARP policy and the firm has replaced it with a policy of qualifying insurance outside the ARP; or
the firm merges with another firm and a policy of qualifying insurance is in place for the merged firm; or
it subsequently transpires that the firm was not in fact required to take out and maintain a policy under these Rules; or
in the case of an ARP policy, it subsequently transpires that the firm was not, or has ceased to be, an eligible firm; or
the qualifying insurer which issues the policy becomes the subject of an insolvency event, and the firm has replaced the policy with another policy of qualifying insurance.

The effect of cancellation in the circumstances described in (3) or (4) above is that the firm ceases to have qualifying insurance in place with effect from the cancellation, and would therefore be in breach of Rule 4.1 if it were to carry on a practice thereafter without taking out a new policy.

Most recognised bodies and licensed bodies (in respect of their regulated activities) are required to obtain cover complying with the MTC and with a sum insured of £3 million, rather than £2 million for other firms. The definition of "relevant recognised body" and "relevant licensed body" in these Rules indicates which recognised bodies and licensed bodies this requirement applies to.

4.4: The provisions of this Rule 4 shall be without prejudice to the ability of firms to include as insureds on a policy persons not required under these Rules to be insured.