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  6. What insurance products cover compliance officers?

What insurance products cover compliance officers?

I am a newly appointed compliance officer for a small firm. Are there any insurance products covering personal liability for compliance officers for legal practice (COLPs) and compliance officers for finance and administration (COFAs)?

When considering the issue of insurance for COLPs and COFAs, it is important to consider your potential exposure and examine the coverage already offered by the practice's insurance. 

Every practice must obtain professional indemnity insurance (PII), in accordance with the SRA's minimum terms and conditions (MTC).

As a compliance officer for the practice, you will be an 'insured' under the MTC policy and therefore will be covered for any civil liability (e.g. professional negligence) arising from your work in private legal practice to the extent that any such liability is covered by the MTC.

The MTC provides a broad range of cover. However, there are a number of significant exclusions that may expose compliance officers to liability. For example, defence costs for disciplinary proceedings by the SRA or Solicitors Disciplinary Tribunal (SDT) are not covered by the MTC.

Some insurers are prepared to include cover for these defence costs in addition to the MTC policy. 

Compliance officers should check firstly whether their practice has this additional cover, either as an endorsement on its PII policy or as part of its directors and officers’ (D&O) insurance policy, and, secondly, whether their role as compliance officer is covered under that policy.

There are also a number of specific insurance products that target compliance officers. 

You should read the terms of any insurance policy and satisfy yourself that the policy will cover a potential risk to which you are exposed that is not covered by any indemnity agreement or other insurance policy provided by your practice.

There is an open question as to the extent to which any of the above options will protect a compliance officer against the fines and penalties to which they may be exposed. 

There is a general legal principle that no person should recover an indemnity against liability resulting from their own unlawful conduct (Holman et al v Johnson, alias Newland [1775] 1 Cowper 341).

There is no simple way to determine whether a particular fine or penalty will be covered by an insurance policy or indemnity agreement, as each case will turn on its own facts. You may want to bear this principle in mind when considering whether a fine or penalty is insurable under law.

See the Law Society's practice note on compliance officers  

Disclaimer: While every effort has been made to ensure the accuracy of the information in this article, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance upon the information given.

Have you got a practice question? Call the Practice Advice Service on 020 7320 5675 or email practiceadvice@lawsociety.org.uk

The Practice Advice Service is staffed Monday to Friday from 9am to 5pm.

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