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Law360, London (September 2, 2020, 12:48 PM BST) -- London underwriters warned the legal sector on Wednesday that professional indemnity insurance could become unsustainable if underwriters are not given more freedom to cancel policies as the COVID-19 pandemic continues to ravage the economy.
The International Underwriting Association, a body representing underwriters in London that are not associated with Lloyd's, has penned an open letter calling on the legal industry to allow insurers to cancel professional indemnity policies when lawyers fail to pay their premiums amid the COVID-19 pandemic. The cover offers protection if a client claims an underwriter's services were not up to scratch.
Existing rules do not allow underwriters to cancel policies if solicitors fall behind on their premiums, the association said.
"Many solicitor firms are facing economic pressures, and we have already seen an increase in requests for payment of premiums by installments," Chris Jones, director of legal and market services, at the association, said.
"Insurers have shown their willingness to work with other professions that are struggling to mitigate the short-term economic effects of COVID-19, but the complete lack of any protection around payment of premium and excesses makes it far more difficult to do this for solicitors," Jones added.
The underwriters said that the objective of the change would be to better manage policies and provide lawyers with the cover they are paying for. The association clarified that it is not proposing a change in the scope of insurance that underwriters offer to solicitors.
"This will benefit the market by providing long-term confidence in the availability of cover and giving insurers more flexibility to develop bespoke arrangements for their clients," Jones said.
The body noted that the inability of underwriters to cancel insurance for lawyers when they do not pay their premiums is not seen in any other regulated profession. Existing rules are "contrary to established contract and insurance law principles," the body added.
The association said that the Solicitors Regulation Authority, which supervision the legal industry, is reviewing its enforcement process to help law firms that are struggling to pay premiums amid the COVID-19 outbreak. But it noted that this is only a short-term solution and does not address underwriters' core concerns.
The underwriters' group said it has discussed its concerns with the SRA.
The Law Society warned in August that solicitors should renew their professional indemnity insurance earlier than usual this year.
Most lawyers renew their cover right on the deadline, which is Oct. 1 each year. But the troubled market and rising premium costs brought on by COVID-19 mean that lawyers should act early this year to avoid a bottleneck, the Law Society said.
--Additional reporting by Irene Madongo. Editing by Ed Harris.
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