The SRA Handbook is no longer in effect.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

SRA Handbook

Arrangements in relation to uninsured firms

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

Rule 15: Arrangements in relation to uninsured firms

15.1

The ARP manager on behalf of the Society shall make arrangements with qualifying insurers to cover any claim against:

(a): a firm in default; and
(b): a run-off firm

including any defence costs relating to a claim, in like manner and to the like extent as the claim and the defence costs would have been covered had that firm during the period of default been in the ARP and been issued with an ARP policy and/or, as the case may require, an ARP run-off policy.

15.2

Subject to Rule 13.8, Rule 14.1 and Rule 14.2, the Society on behalf of qualifying insurers shall be entitled to recover from each and every principal in the firm in default during the period of default all amounts paid in or towards the discharge of a claim and defence costs pursuant to Rule 15 together with interest thereon at Barclays Bank Plc base rate plus three per cent from the date when such amounts were respectively paid. The ARP manager may and is hereby authorised to recover all sums due under this Rule on behalf of the Society.

15.3

A firm shall not be deemed to have been admitted to the ARP or to be covered in accordance with Rule 15 solely by virtue of the fact that the ARP manager may conduct or settle any claim made against that firm under the terms of any agreement between the Society and any qualifying insurer.

Commentary:

If a firm fails to make an application to the ARP, but carries on practice without having obtained qualifying insurance, each principal in that firm will have committed a disciplinary offence. The same is true if a run-off firm fails to apply to be issued with an ARP run-off policy. In each case, that firm, and each principal in that firm, will also be liable under these Rules to:

reimburse to the Society in full the amount paid pursuant to Rule 15.1 in respect of any claim (together with defence costs) made against the firm and relating to the period when it did not have qualifying insurance in force, less any amount due under Rule 14 (where applicable); and
pay an amount under Rule 14 (where applicable) to the Society equivalent to the ARP default premium calculated for the whole of the period of default.

However, if a firm in these circumstances is eligible under Rule 13.1 to be issued with an ARP policy, then, provided that it complies with Rule 13.1 and is issued with an ARP policy, the liability of the firm and the principals of that firm will be limited, from that point on, to the ARP default premium and the excess payable under the terms of the ARP policy.