With the PC renewal exercise over for another year, in this week’s update we look at the important – and often overlooked – issue of insurance cover for regulatory investigations.
As the recent Leigh Day case shows, regulators have deep pockets and, once they have you in their sights will not let go without a fight. Or a Court of Appeal decision. Fortunately for Leigh Day, they were covered. Are you?
The (inappropriate?) use of NDAs is back in the spotlight. What are the legal ethics implications?
There is an interesting report of regulator shopping, with a barrister choosing CILEx over the Bar.
Also recommended reading below – the Law Society practice note on price and service transparency. Remember that certain elements of this applies to all firms, not just those caught by the price transparency. We believe that most firms will have to make adjustments to their websites before December. Tick tock.
Until next time, take care and have a wonderful weekend.
Are you covered for SRA investigations and enforcement?
Recent news of the SRA losing its challenge against the decision to clear Leigh Day of misconduct highlights a growing risk faced by law firms and one where they may not have the insurance cover they think they have.
In this particular case, the vast costs involved are reported to have been £9m for the 7-week hearing. In a previous Gazette feature, Martyn Day one of the firms principals and one of the three Leigh Day lawyers singled out by the SRA, recommended that firms check their professional indemnity policies carefully to see if they are covered for regulatory actions.
Practice across solicitors Professional Indemnity Insurers varies. Some Insurers include regulatory defence costs cover, but only where the investigation is connected to a claim for professional negligence. Other Insurers offer no cover at all for regulatory hearings.
In the case of Leigh Day, there was no cover within their professional indemnity policy wording for the defence costs involved as no civil claim was being brought, the matter involving conduct alone. Fortunately, they had the foresight to arrange a Directors & Officers Liability policy covering all types of regulatory hearing, whether a claim under a PII policy exists or not.
Even if cover is in place, whether within Professional Indemnity or a separate Directors & Officers Liability policy, how many firms would have arranged cover of £9m?
If you would like help in confirming the position under your policy, please contact Gary Horswell for a free policy wording review.
NDAs in the spotlight
Unless you have been living in a cave, or taking a break from the news cycle (tip: try it), you will be aware that NDAs, or ‘gagging orders’ as the press like to call them, are front page news again.
This follows the case of ABC and others v Telegraph Media Group, in which it was decided that a newspaper could not publish details of alleged racial abuse and sexual harassment by a businessman. In other words, contractual confidentiality clauses contained in a settlement agreement trumped free speech.
In a dramatic twist, Lord Hain used Parliamentary Privilege to ‘out’ the businessman as Sir Philip Green.
Why it matters
Whether or not you agree with Lord Hain’s use of Parliamentary Privilege in this instance, the underlying issue for us is really the appropriate use of NDAs. We all know that they are a common and necessary tool in many commercial contexts. Not least settlement agreements, which help employers and employees avoid the nastiness of litigation.
But should they ever be used as a shield for bullying, harassment and other only-too-common behaviours? For a fascinating analysis of this ethical dilemma, see Prof. Richard Moorhead’s recent blog: In the public interest? NDAs after ABC
As legal advisers and officers of the court, where do your duties lie? To your client, yes. But the SRA Principles – your key ethical considerations – make it clear that there are wider issues, including:
- upholding the rule of law and the proper administration of justice
- acting with integrity
- not allowing your independence to be compromised
- behaving in a way that maintains the trust the public places in you and in the provision of legal services
- running your business or carrying out your role in the business in a way that encourages equality of opportunity and respect for diversity
And the SRA makes it clear that:
Barrister sets up her own entity through CILEX
Frustrated barrister Khyati Joshi has succeeded in setting up an immigration practice licensed by CILEx.
Joshi Advocates is one of 13 that have been authorised by CILEx since 2015. She chose to go it alone after 6 years of unsuccessful pupilage searching and has spoken highly of the experience that she has had with CILEx in a recent interview with Legal Futures.
Whilst she has described the application process as thorough, she also spoke highly of the support received from CILEx and accessibility as her regulator.
Why it matters
We are seeing increasing numbers of lawyers looking beyond their most obvious choice of regulator (for example, solicitors switching to CLC).
This competition between regulators is built-into the Legal Services Act 2007. It encourages regulators to strive for continuous self-improvement and efficiency. Otherwise they will see shrinking influence and practising revenues.
Does it work? I think we would need to see significant numbers leaving the SRA (by far the biggest regulator) en masse, before competitive pressures come into play.
But make no mistake, the option to choose your regulator is powerful one.
New and updated Law Society Practice Notes
- Price and service transparency – coming into force for all firms in December 2018
- Consumer Contracts Regulations 2013 – cancellation rights for clients in force since 2014
- Use of investigatory powers – overview of SRA’s powers to investigate misconduct
- Bribery Act 2010 – practical guide to the Bribery Act for solicitors
