From 24 January 2013, Lemma has cancelled all of its policies. This will only affect firms that have ceased to practise and have a run-off policy with Lemma. If you are such a policyholder, you should have received a letter from the administrator Grant Thornton. For further information, see the notice of disclaimer.
The information below applies to firms with claims made before 24 January 2013.
Grant Thornton has issued its first progress report (PDF).
It notes that insurance creditors have priority under Gibraltarian law. This will include firms with claims under policies that arose before 24 January 2013 or claims for return of premiums for the unexpired period after 24 January 2013 when these policies were disclaimed.
Currently, the liquidator is unable to provide an accurate estimate of return premium claims. Admitted and quantifiable insurance claims and estimated reserves applied to those notified as at 30 June 2013 is approximately £35m.
The balance of the liquidator's receipt and payments from 24 January to 30 June 2013 is £3.9m.
Lemma Ukraine, the associated company that provided Lemma's reinsurance for 2008-2010, is now disputing that the reinsurance policy covered solicitors' PII for the 2009 and 2010 years. It has also failed to pay other claims under the reinsurance policy submitted by the liquidator.
Who should read this note?
Any solicitor that has a professional indemnity insurance policy insured by Lemma European Insurance Company with an outstanding claim or that may need to make a claim on a Lemma run-off policy in the future.
What are my options if I want to make a claim on an affected policy?
You should notify Quest Consulting London Limited, the agent of the provisional liquidator (Grant Thornton) immediately on the contact details below.
You should also consider whether or not your firm meets the eligibility criteria for the Financial Services Compensation Scheme (FSCS). If this is the case, then the FSCS may pay up to 90 per cent of your claim in compensation. The remaining 10 per cent of the claim will fall on the insolvent estate. Quest can provide you with the application form to make a claim on the FSCS.
Am I eligible for the FSCS?
The FSCS provides compensation for payment of claims under insurance contracts.
The FSCS rules are aimed at allowing the FSCS to provide compensation at a 'level appropriate for the protection of retail customers and small businesses'.
There are several important restrictions on the scheme in so far as solicitors' firms are concerned. The key points to note are:
- Partnerships (other than limited liability partnerships) are only eligible to bring a claim if their annual turnover does not exceed £1m and their net assets do not exceed £1.4m.
- Corporate bodies (including limited liability partnerships) are only eligible to bring a claim if their annual turnover does not exceed £1m, and either they have not more than 50 employees or their balance sheet net assets (as defined in section 247 (5) of the Companies Act 1985 and section 382(5) of the Companies Act 2006) do not exceed £3.26m.
- Individuals are eligible to bring a claim irrespective of their turnover, net assets or number of employees. This will include sole practitioners and individuals whose practice has ceased and whose policies are in run-off.
Compensation from the FSCS is limited to 90 per cent of the total amount claimed.
General information about the FSCS can be found on its website or you can call its customer service team on 0800 678 1100 or 0207 741 4100. However, for specific enquiries regarding Lemma claims, you should refer to Quest (see details below).
The FSCS have also published a set of frequently asked questions about Lemma Europe.
Who is handling Lemma claims?
Quest Consulting London Limited has been appointed by the provisional liquidator of Lemma to handle all claims on Lemma policies. They are also responsible for handling claims from firms who may be eligible for the Financial Services Compensation Scheme (FSCS).
Quest is responsible for sending out FSCS applications to insureds and if the firm meets the eligibility criteria (see Am I eligible for the FSCS?), Quest will refer the application to the FSCS for a final decision about whether the FSCS will pay 90 per cent of your claim. The remaining 10 per cent of the claim will form part of Lemma's estate.
Quest is also handling those claims made on policies of firms that are not eligible for the FSCS. The entirety of these claims (100 per cent) will fall on Lemma's estate.
If you have an enquiry about a claim on a Lemma policy, you should contact:
52-54 Gracechurch Street
London EC3V 0EH
Telephone: +44 (0) 20 7015 8650
Fax: +44 (0) 20 7015 8651
The notice of the appointment of the provisional liquidator is available at the Lemma website.