Establishing A New Legal Practice? Tips On Obtaining Solicitors’ PI Cover
Planning to set up your own law firm? Perhaps you’ve been wanting to go it alone or set up a niche practice with some like-minded colleagues but haven’t got further than reviewing the Solicitors’ Regulation Authority’s (SRA) rules for setting up a new practice. Those rules require that your application for regulatory approval must include evidence of an offer of professional indemnity (PI) insurance from an SRA-qualifying insurer. Until now, your practice’s PI cover has been organised by someone else, maybe a Practice Manager, so how do you go about obtaining that offer of PI cover? The purpose of this article is to help you navigate the process of obtaining an offer of cover.
Firstly, engage an experienced Solicitors PI insurance broker, as Solicitors PI is not a straightforward form of cover to arrange. Some qualifying insurers won’t consider start-ups, and those that will have very different appetites when it comes to deciding whether to offer terms. They look very carefully at the type of legal work to be undertaken, the number of partners/principals in the new practice, and the amount of post-qualification experience of those individuals. Underwriters need to be convinced that the applicants have what it takes to successfully launch a new practice, and ideally, they want to see prior practice management experience. It’s therefore essential that you engage an experienced broker to guide you through the process and to present your new firm to underwriters correctly.
Secondly, having selected an experienced broker, you need to provide them with a detailed submission to enable them to approach qualifying insurers. The submission needs to include the following:
1. A fully completed Solicitors’ PI Proposal Form; the broker will provide you with the requisite form and should guide you through the process of completing it and advise you on the limit of cover to be sought and what excess you should be prepared to carry.
2. A carefully prepared Business Plan; as above, the broker should guide you through the preparation of the Plan until they are satisfied that it’s ready. After a brief introduction, the Plan should include the following:
Biographies of the applicants and some commentary on why they are now looking to set up a new practice.
A description of the legal services to be provided by the new firm.
The profile of clients that the practice will seek to attract.
An outline Marketing Plan explaining how the practice will attract those clients.
Proposed arrangements for IT, Accounting, Premises, Regulation, other staff, and any external service providers. If you have completed a separate Marketing Plan, then this should be included in the submission.
3. A Profit & Loss forecast for the first two years of the new practice.
4. Full Curriculum Vitae’s (CVs) for each principal. This should include qualification date, prior practice names/dates, and details of partnership/directorship experience.
Thirdly, whilst finalising the submission, your broker should discuss with you which qualifying insurers they propose to approach, and why. And having submitted the proposal, it may take a qualifying insurer a week to provide a response, and they may well ask for additional information. When responses are received, your broker should brief you on the terms being offered and explain carefully the policy terms and conditions set out in the wording, including the Exclusions and any Endorsements and Extensions.
Your application to the SRA must include an offer of insurance; in essence, a copy of the formal quotation, which will satisfy the regulator that there is an insurer prepared to provide the necessary SRA-compliant insurance. The SRA does not require you to have incepted cover at this stage, as they can take up to three months to consider your application for regulatory approval. Assuming that the SRA approves your application, you must provide evidence of the PI insurance having been incepted before you are permitted to commence practice for approval. Your broker will negotiate with the selected insurer to incept cover and will provide you with a Certificate of Qualifying Insurance and a Policy Schedule, which you can lodge with the SRA. It is worth noting that you do not have to incept cover with the insurer that provided the offer of cover that you submitted in your SRA application. Whilst your application was being considered by the SRA, your broker may have negotiated something more competitive with an alternative insurer.