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The Insurance Act 2015 came into force on 12 August 2016, introducing a higher standard of disclosure by firms when arranging PII.
Firms are now required to make a ‘fair representation of risk’ at proposal stage in order to satisfy the test, to include not only risks of which they are aware, but also those of which they ought to be aware or ought to have disclosed after making reasonable enquiries. Effectively, this is information which would influence the judgment of a prudent insurer in determining whether to accept a risk or which would put it on notice to make further enquiries.
Although failure to make a fair representation would not entitle insurers to avoid a claim or cancel the policy, they could seek reimbursement or bring an action for non-disclosure or breach of the duty to make a fair representation.
The changes highlight the increased importance of good internal risk and compliance procedures and training by firms. The SRA Minimum Terms and Conditions of Professional Indemnity Insurance have also been amended to reflect the changes.
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T: 0113 385 4483
M: 07432 695 289
The Law Society has issued a practice note about the risks to solicitors posed by this new legislation, which came into force on 30 September.
The SRA has urged all practices to check HM Treasury’s consolidated list of asset freeze targets, which lists designated persons subject to financial sanction under EU or UK legislation.
The practising certificate renewal period opened on Monday 2 October.
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