SRA's PII proposal sparks cyber-loss concern
The Law Society of England and Wales has said it a proposal from the Solicitors Regulation Authority (SRA) aimed at dealing with insurers鈥 concerns about cyber-related risks.
The society said it backed being carried out by the SRA on proposed changes to the minimum terms and conditions (MTCs) for professional indemnity insurance (PII) policies.
The body, however, does not support a new clause drafted by the SRA that excludes from cover any cyber-related first-party losses 鈥 that affect only the law firm 鈥 while confirming that third-party losses remain within the scope of MTCs.
Indemnify law firms
Law Society president I Stephanie Boyce said: 鈥淲e support the SRA鈥檚 commitment to ensuring the MTCs won鈥檛 exclude any liability of the insurer to indemnify a law firm against any civil liability claim, and we encourage the regulator to remain focused on consumer protection when considering other policy changes concerning indemnification.
鈥淲e do, however, have some significant concerns about the possibility of coverage disputes between the provider of a firm鈥檚 cyber-insurance and the provider of their mandatory PII.
鈥淭herefore, we cannot support the implementation of the new exclusion clause,鈥 she said.
President Boyce said the society would prefer the SRA to introduce wording affirming that solicitors鈥 MTC-compliant PII covers all cyber-risks, including first-party losses.
Exclusion clause
鈥淎n unintended consequence of the new exclusion clause may mean that firms will feel compelled to purchase cyber-insurance from the same underwriter which provides their mandatory PII, further limiting the insurance options available to our members,鈥 she added, warning that some smaller firms may feel forced to close if they could not buy cyber-insurance.
鈥淯nless these issues can be resolved, the proposals set out in this consultation would present substantial new risks to our members and the consumers of their legal services,鈥 President Boyce said.
Yesterday, the Law Society of England and Wales said that the spring 2021 PII renewal season saw law firms pay an average of 30% more for their cover.
A Law Society spokeswoman said: 鈥淲e previously warned firms could expect increases of 30% for their PII. Now, it seems it has happened.
鈥淭he legal profession is operating in a hard market, but the situation is being made worse for our members by a significant minority of firms producing claims that exceed the premiums raised by insurers.
鈥淭his situation is not sustainable, so it is essential that members 鈥 and those doing conveyancing work in particular 鈥 take steps to review their risk management practices and ensure these are adequate to avoid all but the most improbable claims."