The status of ‘freelance solicitors’ is a relatively new regulatory arrangement for the SRA, coming in with the 2019 Standards and Regulations. Before that, the only way for a solicitor to practice was through a firm, as a sole practitioner or in-house lawyer. Freelancers are a new breed of solicitors, who don’t quite fit into those models.
It is incorrect to say that freelance practitioners are ‘unregulated’, since the full Code of Conduct (for individuals) and SRA Principles apply. These rules contain the core professional and ethical duties, and freelancers are answerable to the SRA for breaches.
But since freelancers operate outside the scope of a regulated firm or sole practice, many of the other parts of the rule book fall away. That includes the rules on professional indemnity insurance (PII).
So what level of insurance does the SRA require freelancers to have?
First, determine what type of freelance solicitor you are
The 2019 rules actually introduced three new ways to practise:
- Freelance solicitor undertaking ‘reserved activities’ (conveyancing, probate, litigation, etc)
- Freelance solicitor doing non-reserved work (e.g. commercial contracts, general legal advice, will writing etc.)
- Solicitor practising through an unregulated business (e.g. an employer, or your own limited company)
The first type of freelancer is subject to various restrictions, including the handling of client money, use of trading names, and taking on employees. See rule 10.2(b) of the Authorisation of Individuals Regulations for more information.
There is more flexibility in the second and third type. However, there is no option to undertake the reserved legal activities.
Each type of freelance solicitor has its own pros, cons and limitations.
Freelance solicitor insurance requirements
It’s worth noting that none of the new types of freelance solicitors is required to have an insurance policy under the SRA Minimum Terms. That means you are not restricted to obtaining a professional indemnity policy from the limited pool of insurers that sign up to the SRA’s ‘gold plated’ terms.
In fact, the rules on insurance are notably relaxed. Only the first type of freelance solicitor (those conducting reserved activities) have a regulatory insurance requirement. And that is only to have ‘adequate and appropriate’ insurance in place.
The SRA wants to see that the solicitor has come to a rational conclusion about ‘adequateness’ and ‘appropriateness’ based on their practice. They should therefore take time to write down why a particular policy is suitable based on factors including:
- Type of clients serviced
- Type of legal work
- Volume of cases and clients taken on
- Potential exposure
- Their claims history
The ‘adequate and appropriate’ test not only applies to the amount of cover, but also whether the policy mirrors the usual ‘claims made’ basis of solicitors insurance and any run off arrangements.
And the test applied by the SRA also includes whether clients are made fully aware of the insurance implications of instructing a freelance solicitor as opposed to a fully regulated firm or sole practitioner.
What about the other types of freelancers?
The second and third type of solicitors practising outside a regulated firm are not subject to any specific SRA rules on insurance.
However, it is obviously not a good idea to practise uninsured.
Personal liability for claims aside, all practising solicitors are required to act in the best interests of their clients (Principle 7). There is a strong argument to say that this principle extends to the amount and type of insurance freelance solicitors have in place.
They should therefore go through a similar exercise to establish what type of insurance is suitable in their given circumstances. It might be that a much lower level of insurance is warranted in low risk, low exposure areas of law – but without that documented assessment it would be hard to convince a regulator that the client’s best interests have been considered.
They should also get expert advice. We suggest that all solicitors contemplating self employment should speak to a specialist insurance broker first. There are new products coming to the market, specifically tailored for freelance solicitors.