S.I. No. 617/2007 - The Solicitors Acts 1954 to 2002 (Professional Indemnity Insurance) Regulations 2007

1. 2The Law Society established a Professional Indemnity Insurance Task Force to examine the area of professional indemnity insurance. The Report of the Professional Indemnity Insurance Task Force was presented to the Council of the Law Society at its meeting on 13 July 2007, together with revised draft Regulations and associated documentation, which the Council adopted at that meeting. The principal purpose of the revised Regulations is to make provision to remedy existing perceived gaps in the system of professional indemnity insurance coverage for solicitors for the better protection of the profession and its clients.

2 Regulation 1, General

2. 2Solicitors and registered lawyers in practice prior to 1 November 2007 continue, by virtue of the provisions of the 1995 Regulations as amended, to require coverage on an individual basis for the full practice year commencing on 1 January 2007 and ending on 31 December 2007. “Firms” (as defined, see Regulation 2) are required to maintain coverage under the revised Regulations with effect from 1 November 2007 and for all indemnity periods thereafter. The transitional provisions (see Regulation 3) are designed to avoid any unnecessary duplication of coverage requirements.

3 Regulation 2, Interpretation

3. 1.9“run-off period”

This term defines the period during which run-off cover must be maintained by a firm that ceases practice. Cover must be maintained for a six year period after cessation of practice, but if a firm ceases practice during an indemnity period, cover must be maintained for six years after the end of the relevant indemnity period. Thus a firm ceasing practice on 1 December 2008 would be required to maintain run-off cover until 30 November 2014, whereas a firm ceasing practice on 1 January 2009 would be required to maintain run-off cover until 30 November 2015.

4 Regulation 3, Maintenance of Insurance

4. 5The Regulations impose an obligation on all firms to provide evidence to the Society on request that it is complying with its obligations under Regulation 3, and to provide specific confirmation of coverage within ten days of the commencement of the relevant indemnity period. The form of confirmation of coverage is set out as Schedule 3 to the Pool Participation Agreement to be entered into by all qualifying insurers. Under Regulation 3(

m

), principals of firms are responsible for ensuring that the firm complies with its obligations under the Regulations to maintain the necessary coverage.

5 Regulation 4, Self-Insured Excesses

5. 2Firms that wish to take advantage of this option should take note of their obligations under Regulation 4 to make prompt payment of the amount of the excess to claimants and the obligation imposed on principals of firms under Regulation 4(

c

) to ensure that this occurs.

6 Regulation 5, Run-off Coverage

6. 6Firms should note that the ARP manager will be entitled to recover premium amounts from defaulting run-off firms and their principals in respect of the coverage extended under Regulation 5(

f

). The premium amounts to be charged are expected to be significantly in excess of premium rates set in the commercial market for run-off coverage, and it is expected therefore to be in the interest of firms to make arrangements for run-off coverage with their insurers, rather than allowing themselves to become covered as defaulting run-off firms.

7 Regulation 6, Insolvency of Insurers

The insolvency of insurers is a rare event. In such circumstances clients require protection, and therefore Regulation 6 of the revised Regulations provides for each firm to ensure that replacement coverage is thereupon established with an insurer that is unaffected by insolvency. Firms should note that under Regulation 6(

a

) the responsibility to establish replacement coverage falls upon the firm in question, is not contingent upon the firm being required to take any action by the Society and that the responsibility to take action arises from the date upon which the insolvency event occurs, not the date on which the firm becomes aware of the insolvency. Firms should therefore be alert to the circumstances of their particular insurers and should not wait to take action until notified by the Society of an insolvency.

8 Regulation 7, The Assigned Risks Pool

7. 14War, Terror, Asbestos, Radiation

The Insurance may exclude liability of the Insurer to indemnify any Insured in respect of losses directly or indirectly caused by:—

(

a

) war, riot, civil commotion and other hostilities,

(

b

) terrorism,

(

c

) asbestos or any actual or alleged asbestos related injury or damage involving the use, presence, existence, detection, removal, elimination or avoidance of asbestos or exposure to asbestos, and

(

d

) ionising radiation or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel; or from the radioactive, toxic, explosive, or other hazardous properties of any explosive nuclear assembly or nuclear component thereof

provided that in each case any such exclusion or endorsement does not exclude or limit any liability of the Insurer to indemnify the Insured against civil liability or related Defence Costs arising from any actual or alleged breach of duty in the performance of (or failure to perform) Legal Services or failure to discharge or fulfil any duty incidental to the Firm’s Practice.

8 General Conditions

8. 4Retrospective coverage under the assigned risks pool is not permissible by virtue of Regulation 7(

h

)(ii) and coverage will terminate automatically on the occurrence of a number of events set out in Regulation 7(i)(i) to (iii), including the firm ceasing to satisfy the relevant eligibility criteria.

9 Regulation 8, Membership of Assigned Risks Pool

9. 3Firms should note that the consequence of making an application to enter the pool where the firm is, or is deemed to be, ineligible is that the firm may be required to indemnify the Society and the ARP manager in respect of their costs of dealing with any such application. This provision is set out in Regulation 9(

d

).

10 Regulation 9, Defaulting Firms

10. 2Firms that become defaulting firms for the purposes of the Regulations will be required to pay ARP default premium, and it is anticipated that the level of such premium will be such as to properly reflect the relevant firm’s failure to comply with its obligations under the Regulations to maintain coverage and the resulting increased risk to the assigned risks pool. The ARP manager has power to set the level of ARP default premium pursuant to Regulations 9(

b

) to 9(

h

).

11 Regulation 10, Risk Management Audits

11. 3Firms must indemnify the Society in respect of the costs of a risk management audit exercise pursuant to Regulation 10(

f

). Regulation 10(

g

) provides that any firm that fails to comply with its obligations under a risk management audit may be treated as ineligible for coverage under the assigned risks pool. The terms of reference of a risk management audit are as set out in Appendix 2 to the Regulations.

12 Regulation 11, Risk Management Audit Reports

12. 3Firms are required to indemnify the Society in relation to the costs of steps taken under Regulation 11(

e

)(ii) (additional supervision) or Regulation 11(

e

)(iii) (ineligibility) and firms should note the responsibility of principals to ensure that firms discharge their obligations thereunder.

13 Regulation 12, Responsibilities of Principals

Principals have extensive responsibilities under the Regulations as will be apparent from the foregoing notes, but Regulation 12 states explicitly that principals are responsible for ensuring that all firms of which they are principals comply with all of their obligations under the Regulations and Regulation 12(

a

) explicitly deems it misconduct for a principal to fail so to procure. Regulations 12(

b

) to 12(

e

) set out certain further provisions relating to the responsibilities of principals under the Regulations.

14 Regulation 13, PII Committee

Regulation 13 makes provision for the establishment and composition of the PII Committee of the Society for the purposes of supervising the administration of the Regulations.

15 Regulation 14, Provision of Information

This Regulation requires firms and principals to provide any claimant against the firm with details of that firm’s insurance coverage, and permits the Society to maintain a register of coverage reported by firms and to permit inspection of such register.

13. Professional Indemnity Insurance Committee

(

a

) The Council shall, as soon as practicable after the coming into operation of these Regulations, appoint a Professional Indemnity Insurance Committee which shall be responsible for exercising on behalf of the Council the functions vested in:—

(i) the Society by or under

section 26

of the

Solicitors (Amendment) Act 1994

; and

(ii) the PII Committee by or under these Regulations; and

(iii) (to the extent that the 1995 Regulations remain in force by virtue of these Regulations) the committee constituted under the 1995 Regulations and designated as the PII Committee thereunder by or under the 1995 Regulations

save in each case for the making of regulations.

(

b

) The Society shall from time to time in its discretion determine the number of members of the PII Committee and appoint the members thereof.

(

c

) The quorum of the PII Committee shall be three.

(

d

) The PII Committee may, with the prior approval of the Council, establish sub-committees to carry out some or all of its functions, or delegate some or all of its functions to an executive of the Society or the ARP manager.

(

e

) The PII Committee shall exercise on behalf of the Council the following functions of the Society:—

(i) making recommendations, issuing guidance or giving directions on behalf of the Society in relation to the management, administration and protection by the ARP manager of the assigned risks pool;

(ii) (without prejudice to the generality or specificity of any Regulation) directing steps necessary or expedient to be taken to ascertain whether these Regulations or the provisions of the 1995 Regulations are being complied with;

(iii) specifying circumstances in which any solicitor or registered lawyer or specified category of solicitors or registered lawyers may be exempted in whole or in part from compliance with these Regulations or the 1995 Regulations;

(iv) specifying the manner in which solicitors or registered lawyers or any specified category of solicitors or registered lawyers shall bring their compliance with, or exemption from, these Regulations or the 1995 Regulations to the notice of their clients or the Society;

(v) determining whether a perceived breach of section 26(6) of the Solicitors Act, 1994 or of these Regulations or of the 1995 Regulations by a solicitor or registered lawyer should be the subject of an application by the Society to the Disciplinary Tribunal for an inquiry into the conduct of that solicitor or registered lawyer on the ground of alleged misconduct;

(vi) making decisions in relation to matters (including procedural matters) deemed to be in pursuance of or incidental or supplementary to the functions vested in the Society under

section 26

of the

Solicitors (Amendment) Act 1994

or in pursuance of or incidental or supplementary to the provisions of these Regulations or of the 1995 Regulations.

(

f

) The PII Committee shall, at least once in every calendar year, review the minimum terms and conditions and shall recommend to the Society any amendments thereto as to the PII Committee appear appropriate.

(

g

) The PII Committee shall be entitled to appoint the ARP manager to discharge the functions and responsibilities of the person or entity appointed as Pool Manager under the 1995 Regulations to the extent that those Regulations remain in effect by virtue of these Regulations.

14. Provision of Information

(

a

) If a person asserts a claim against a firm or any person insured under that firm’s qualifying insurance and the claim relates to a matter within the scope of coverage under the minimum terms and conditions, that firm and every principal thereof (including, in the case of a firm that has ceased its practice, any former principal thereof) shall be required to provide that claimant on request with details of the identity of the qualified insurers that provided the qualifying insurance, together with any applicable coverage reference number and the relevant qualified insurers’ contact details.

(

b

) The Society may maintain in such form or forms as it considers appropriate a register of firms showing such details of any qualifying insurance, assigned risks pool coverage or run-off cover maintained by those firms appearing on the register as the Society deems fit, and may permit persons to enquire as to the registered status of firms and provide persons with the information contained in the register relating to firms in such manner and to such extent as the Society may determine.

15. Amendment to Independent Law Centres Regulations

(

a

) The Solicitors Acts 1954 to 2002 (Independent Law Centres) Regulations, 2006 are hereby amended by the deletion of Regulation 8 thereof and its replacement with the following:—

“For the avoidance of doubt, an employed solicitor shall be required to comply with the Solicitors Acts 1954 to 2002 (Professional Indemnity Insurance) Regulations 2007.”

Dated this 11th day of September 2007.

Signed on behalf of the Law Society of Ireland pursuant to

Section 79

of the

Solicitors Act 1954

.

PHILIP JOYCE

President of the Law Society of Ireland

SCHEDULE TABLE OF REVOCATIONS

Name of Instrument

Extent of Revocation

The Solicitors Acts 1954 to 1994 (Professional Indemnity Insurance) Regulations 1995 (Statutory Instrument No. 312 of 1995)

Revoked in its entirety save that:—(i) the instrument (as subsequently amended) shall remain binding upon solicitors and registered lawyers required, prior to the operative date, by virtue of the provisions of the instrument to maintain run-off cover (as defined by the instrument) such that those solicitors and registered lawyers shall be required to continue to maintain such coverage in accordance with the terms of the instrument and that the provisions of the instrument (including provisions relating to the enforcement thereof and the penalties thereunder) shall be fully continued in effect as regards such solicitors and registered lawyers and such run-off cover; and(ii) the instrument (as subsequently amended) shall remain in effect to the extent necessary to permit the proper functioning and operation of the assigned risks pool constituted by virtue of the provisions of the instrument to permit that assigned risks pool to be administered to fulfil the terms of all coverages granted thereunder

The Professional Indemnity Insurance (Amendment) Regulations 1998 (Statutory Instrument No. 209 of 1998); The Solicitors Acts 1954 to 1994 (Professional Indemnity Insurance) (Amendment) Regulations 1999 (Statutory Instrument No. 362 of 1999); The Solicitors Acts 1954 to 2002 (Professional Indemnity Insurance) (Amendment) Regulations 2004 (Statutory Instrument No. 115 of 2004); The Solicitors Acts 1954 to 2002 (Professional Indemnity Insurance) (Amendment) Regulations 2005 (Statutory Instrument No. 122 of 2005)

Each revoked in its entirety save that the provisions of the relevant instrument shall be continued in effect to the extent that they amend The Solicitors Acts 1954 to 1994 (Professional Indemnity Insurance) Regulations 1995 (Statutory Instrument No. 312 of 1995) in order to give effect to the provisions of this Table as they relate to the revocation of The Solicitors Acts 1954 to 1994 (Professional Indemnity Insurance) Regulations 1995 (Statutory Instrument No. 312 of 1995)

The Solicitors Acts 1954 to 1994 (Euro Changeover) Regulations, 2001 (Statutory Instrument No. 504 of 2001)

Regulation 3 only

APPENDIX 1

MINIMUM TERMS AND CONDITIONS OF PROFESSIONAL INDEMNITY INSURANCE

CONTENTS

Page No

1Interpretation 30

2Scope of Cover 35

3Minimum Level of Insurance Cover 37

4Self-Insured Excesses 38

5Special Conditions 39

6Run-Off Cover 41

7Exclusions 42

8General Conditions 46

9Dispute Resolution 47

MINIMUM TERMS AND CONDITIONS OF PROFESSIONAL INDEMNITY INSURANCE FOR SOLICITORS AND REGISTERED LAWYERS IN IRELAND

1 Interpretation

S.I. No. 617 of 2007

THE SOLICITORS ACTS 1954 TO 2002 (PROFESSIONAL INDEMNITY INSURANCE) REGULATIONS 2007

Notice of the making of this Statutory Instrument was published in

“Iris Oifigiúil” of

11

th September

, 2007.

THE LAW SOCIETY OF IRELAND, in exercise of the powers conferred on them by

section 26

of the

Solicitors (Amendment) Act 1994

hereby make the following Regulations:-