Sole practices and two-partner firms dominate Assigned Risks Pool
The vast majority of law firms that failed to find indemnity insurance earlier this month and fell into the Assigned Risks Pool (ARP) are sole practices and two-partner firms, the SRA has revealed.
The vast majority of law firms that failed to find indemnity insurance earlier this month and fell into the Assigned Risks Pool (ARP) are sole practices and two-partner firms, the SRA has revealed.
A spokesman for the SRA said the most recent figure for the number of firms in the ARP was 256, compared to 160 this last time last year.
However, he said the figure was changing by the hour and would not settle down for another few weeks.
John Scott, vice chairman of the Sole Practitioners Group, said the SPG had been inundated with calls from sole practitioners unable to find indemnity insurance.
He said one female solicitor told him she was feeling suicidal after her existing insurer refused her cover.
Michael Loveridge, a sole practitioner and conveyancer in Lancashire, said insurers were looking for 'risk-free' practices and targeting any firm with a claim, regardless of whether or not it was justified.
'I suspect that mortgage lenders are driving this,' he said. 'A lot of dodgy conveyancing work was done in the last few years of the boom and the lenders are concerned that problems will come to light when properties are sold.'
In a further blow for sole practices, Co-operative Financial Services (CFS), owner of the Britannia Building Society, carried out its threat to axe 3,600 sole practitioners in England and Wales from its conveyancing panel.
Scott said he was concerned that other lenders might follow suit.
'Has the Co-op been acting out of step, or is this indicative of something more widespread?'
He said he had been forced to turn away the son of a client, who had arranged his mortgage with the Co-op.
'He was genuinely upset,' Scott said. 'Applications to join panels should be decided on their merits, but in this day and age it doesn't happen. This could be the death knell for certain firms.'
Loveridge said other lenders were already operating unofficial policies to exclude sole practitioners from their panels.
'This could be the thin end of the wedge,' he said. 'The average high street practice will probably not exist in three to four years.
'They are the equivalent of the corner shop, with Tesco opening down the road.'
CFS has said it will continue to negotiate with the law societies of Scotland and Northern Ireland, and would give them until 21 October to provide 'appropriate reassurance' about their compensation fund arrangements.
Mike Fairbairn, CFS director of risk, said the company understood the disappointment its decision had caused to the English and Welsh Law Society and its sole practitioner members.
'Our duty rests clearly with our members and it is with their interests in mind that this decision has been taken,' he said.
'We are, in effect, being asked to assume risks in relation to sole practitioner fraud that should properly lie with the profession itself.'
Fairbairn said CFS had been unable to secure insurance to cover it against sole practitioner fraud. He added that sole practitioners made up less than five per cent of the legal services required by CFS for its mortgage business.
Robert Heslett, president of the Law Society of England and Wales, said the reassurances sought by CFS about the compensation were unrealistic and ignored the fact that it was a limited fund of last resort, which had to be operated according to statutory rules.
He said the decision by CFS to axe the sole practitioners undermined its claim to be 'leading the way on ethical and community matters'.
Heslett added that the move 'could well contribute to putting several thousand solicitors' livelihoods and the livelihoods of their employees at risk'.