Who should read this?
Solicitors or former solicitors who were principals in a firm that ceased to practise whilst being insured with Lemma Europe. Lemma Europe wrote solicitors' professional indemnity insurance (PII) cover in the years 2009-2010 and 2010-2011. This business may have been placed through wholesale insurance brokers called Indemnity Risk Solutions LLP and Monitor Insurance Services Ltd.
What is the issue?
On 24 January 2013, the Supreme Court of Gibraltar made an order, on a petition by Gibraltar's Financial Services Commission, winding up Lemma Europe and appointing Frederick White of Grant Thornton (Gibraltar) as the company's liquidator ('the Liquidator').
The Liquidator has disclaimed all of the contracts of insurance under which Lemma Europe was or might be liable. This will include Lemma’s run-off policies of any firm that ceased to practise during or on expiry of a relevant period of insurance without the firm obtaining alternative cover ('affected firms'). These policies will be cancelled from 24 January 2013.
For further information, see Notice of Disclaimer before the Supreme Court of Gibraltar on 24 January 2013.
What does this mean?
You may be uninsured or personally liable to pay claims.
From 24 January 2013, affected firms will be without a valid run-off policy. This means that the firm is uninsured for any claims that are made after this date.
Run-off insurance provides cover for PII claims, which can still be made after a firm ceases to practice. The Solicitors Regulation Authority (SRA) requires all insurers to provide six years of run-off cover for any firm that ceases to practice as part of the solicitors' PII policy.
Further information about run-off cover.
There is no regulatory requirement imposed by the SRA that affected firms purchase an additional policy of run-off cover in the event that their policy is cancelled due to insurer insolvency, however, you should consider your potential exposure to claims. Depending on a firm's business structure, uninsured loss can have severe personal consequences, see our advice on importance of insurer financial security.
You may be eligible for a return of premium paid for run-off cover.
The Supreme Court of Gibraltar has directed that the amount for which a person injured by disclaimer of a contract of insurance may prove in the liquidation is to be such proportion of the last premium paid as is proportionate to the unexpired portion of the period in respect of which that premium was paid, unless the Liquidator of Lemma Europe agrees or the Court directs that the person is entitled to prove for a different amount.
The Liquidator will be able to admit such claims without a formal proof of dividend, and they will rank as 'insurance debts' which have priority in the insolvency of an insurance company in Gibraltar.
What should I do?
1. Contact the liquidator
You should contact the Liquidator via the following:
Frederick David John White
Grant Thornton (Gibraltar) Limited
6A Queensway
P.O Box 64
Gibraltar
Tel: +350 200 45502
Fax: +350 200 51071
2. Contact a PII broker
You should also contact a solicitors' PII broker to ascertain whether there is an insurer prepared to offer your firm an alternative run-off policy. A list of the major brokers and insurers (including insurers’ financial security ratings) within the market is available below. The Law Society has also published a guide to selecting a suitable broker.
Download the list of brokers and insurers (PDF 289 kb)
Download guide to broker selection (PDF 409kb)
3. Contact the FSCS
You may also be eligible for compensation through the Financial Services Compensation Scheme (FSCS). For further information:
What is the Law Society doing to help?
The Law Society is doing all it can to assist the Liquidator identify and contact affected solicitors. We will continue to monitor the situation and provide updated guidance to members.
The Society has a range of guidance on the financial security of insurers and insolvency of an insurer to assist our members:
For further assistance, contact the Practice Advice Service on 0870 606 2522 or email practiceadvice@lawsociety.org.uk