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Compliant or complaint?

ATE Insurance, The SRA Standards and Regulations 2019 and the importance of judgment

Matthew Pascall, Senior Underwriting Manager at Temple Legal Protection and Paul Bennett (Solicitor and Partner at Bennett Briegal LLP) explore the issues in the context of After The Event Insurance (ATE) in litigation.

(Estimated reading time: 9 minutes, 39 seconds)

On the 25th November 2019 the SRA Standards and Regulations 2019 (STaRs) come into force to replace the SRA Code of Conduct 2011. These changes are the most significant regulatory changes in a generation. The professional obligations for solicitors are subtly altered by the changes.


What’s the issue?

Historically, law firms and insurance brokers could form a relationship and the law firm’s obligation to advise clients on the availability and suitability of ATE was assumed to be complete. Under the STaRs regime the onus moves from the law firm to the individual solicitor. Why? The SRA is now promoting the issue of personal professional responsibility and moving away from entity-based regulation, which has been the focus of SRA regulation of the profession over the last decade or so.

The SRA are reducing the current ten Principles to seven. The impact? The SRA Principles (2019) under the STaRs regime should be read as ethical obligations and signposts. The opening line of these (and therefore the whole STaRs regime) reads:

“The SRA Principles comprise the fundamental tenets of ethical behaviour that we expect all those that we regulate to uphold. This includes all individuals we authorise to provide legal services (solicitors, RELs and RFLs), as well as authorised firms and their managers and employees. For licensed bodies, these apply to those individuals, and the part of the body (where applicable), involved in delivering the services we regulate in accordance with the terms of your licence.” 

The renewed focus on individual obligations, conduct and on looking behind the veneer of the law firm and client relationship, is reflective of the recent emphasis in professional disciplinary cases in which the SRA has, over the last three or four years, focused on the individual’s professional obligations rather than those of the firm itself; as was expected under the SRA Code of Conduct 2011 and when the Compliance Officer for Legal Practice (COLP) and Compliance Officer for Finance and Administrator (COFA) roles took effect on the 1st January 2013. The Legal Services Act 2007 established the concept of “entity” or firm regulation, but these changes reset the regulator focus on the individual professional.


Your personal obligations

Think of the revised SRA Principles as placing your judgement of your ethical obligations centre stage. In the context of funding and insurance in litigation matters: have you explored the full range of funding and insurance options with your clients? Have you acted in the clients’ best interests? Principle 2 now requires that:

“[You act] in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.”

The SRA are expecting the solicitor to think about the wider trust and confidence of the public. The subtle difference from the 2011 version is that this is about the individual solicitor and not the firm or entity.

The new Principle 7 requires:

“[You act] in the best interests of each client.”

If you do not consider a Conditional Fee Agreement (CFA) with your client are you acting in their best interests if others would? If a CFA would actually cost the client more in the long run it may not be right. If you do not consider this with your client then are you acting in the client’s best interest? No.

Temple Legal Protection and Temple Funding can help you fulfil your professional obligations under the revised code. There is no point in advising on ATE with a client if that discussion is not informed. Getting to know what Temple can offer and how their ATE and funding works will enable you to give your client the information they need to make an informed decision.


The Individual Code

The STaRs separates out the solicitor’s obligations into the individual solicitor’s own obligations and those of the firm. There are now therefore two Codes. The individual Code for Solicitors states:

“8.6 You give clients information in a way they can understand. You ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them.

8.7 You ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.”

The impact of these two personal, professional obligations is to remind individual solicitors it is their responsibility to advise in a manner that clients can understand and make decisions on. The individual solicitor can therefore no longer assert “The only way my firm acts is on the following basis….” and rely on the firm having dealt with funding advice. Solicitors need to satisfy themselves and record why the approach adopted is appropriate.

As the preamble states:

“You are personally accountable for compliance with this Code – and our other regulatory requirements that apply to you – and must always be prepared to justify your decisions and actions.”

Note the use of the word “You”. It is a recurring theme in personalising the obligations on individual professions. Neither “you” or the term “firm” are defined terms under the SRA’s Glossary to their rules, meaning the exact biting point of any rule is open to interpretation or, as the SRA may see it, to be interpreted in the context of the particular circumstances in which the solicitor’s conduct might be examined. In either case each and every solicitor is now personally responsible in a regulatory sense for their own individual compliance with a wider set of obligations.


SRA Financial Services (Conduct of Business) Rules

Under the SRA Financial Services (Conduct of Business) Rules under the Code of Conduct 2011, the financial services obligations were expressly focused on the firm and its obligations. Rule 3.2 read:

“If a firm informs a client that it gives a personal recommendation on the basis of a fair and personal analysis [of any ATE or other such product].”

By contrast the STaRs version of the same titled rules states at Standard 11.2 states:

If you inform a client that you give a personal recommendation on the basis of a fair and personal analysis [of any ATE and other such product]:”

The expectation is now focused on you personally – not in terms of liability for negligence but certainly in terms of your own professional duties towards a client. Each solicitor must therefore be in the position to justify their choice of advice, advisory options and any product choices. We suspect many solicitors simply leave such matters to their law firm, something which now needs to change to be able to justify the choices and advice offered to the client.


Practically how does this impact on solicitors and advice to clients?

Each and every solicitor involved in litigation needs to ensure they have advised on all potential and appropriate insurance and funding options. This will include, in suitable cases, ATE insurance. Solicitors in larger law firms can no longer think “we do not offer that” because of the shift of the SRA Financial Services (Conduct of Business) Rules to personal obligations. This coupled with the introduction of the SRA Code of Conduct for Solicitors – which returns professional obligations to the individual solicitor and away from the firm, as was always the case until the SRA 2011 regime – brings these personal, professional obligations into being for a generation of solicitors unused to such a personal approach.

When recommending an ATE insurance product, two criteria from the SRA Financial Services (Conduct of Business) Rules Standard 11.2 will bite:

“(a) you must give that personal recommendation on the basis of an analysis of a sufficiently large number of insurance contracts available on the market to enable it to make that recommendation; and

(b) that personal recommendation must be in accordance with professional criteria regarding which contract of insurance would be adequate to meet the client’s needs.”

For most busy practitioners the obligations are too onerous to make a personal recommendation and to conduct a market search for each and every client (unless the caseload is very small and bespoke insurance is the only option).


What is the alternative?

You can tell your clients that you do not want to provide a personal recommendation because you are not in position to do so and then refer clients direct to a broker or insurer for matters. This will feel like poor service and a failure to advise to many law firm clients, particularly commercial clients who think instructing a specialist means they get full advice.

If you chose not to make a personal recommendation, you can tell your clients: “In cases such as yours, a review of the ATE market as a whole is not either realistic nor cost effective. As a result I am not going to make a personal recommendation that you should use a particular ATE insurer. However, we work with Temple Legal Protection and Temple Funding, partners who are well recognised and respected in the ATE insurance and funding sectors. I am going to give you their details and some information about them. I know Temple and I can explain how their ATE and disbursement funding works. , but you remain free to choose any other insurer of your choice. We simply recommend in cases like yours that ATE insurance is a sensible precaution against the risks faced.”


Working with us

Getting to know Temple and its products and services is straightforward.

Temple Legal Protection have developed a product which can be explained easily and is recognised as a market leader.

Meeting Temple’s underwriters will enable you to fully appreciate what lies behind the name. They can offer training to you and your colleagues so you will be better informed about what Temple can offer.

They have a clear and easy-to-read client guide along with a product guide and a solicitor’s guide that you can give clients. These guides will enable your client to make a well-informed decision in a situation where you do not want to make a personal recommendation.


Next steps for your future approach to advising on ATE insurance

Each individual solicitor will want to make sure they can exercise their personal professional obligations effectively. As a minimum therefore you should be considering:

  • What your firm has done about ATE insurance and disbursement funding advice in the past?
  • Review your approach to the revised SRA STaRs (one of the authors has advised numerous law firms on their engagement letter and Terms of Business as a consequence of these and associate changes);
  • Set out in a policy the ATE insurance review approach undertaken – and share this with each and every solicitor advising on ATE for the firm;
  • Ensure the firm puts on training – against the STaRs (one of the authors here has trained thousands of solicitors already);
  • Get to know an insurer such as Temple and make sure you know enough about them so you can provide your clients with the right information. Then they can make well-informed decisions about insurance in situations where you cannot make a personal recommendation.
  • It is both the individual and the firms’ reputation and standing which are at stake. It is time to review your own approach to advising on ATE insurance, review the revised SRA obligations and make sure your firm’s approach is reflective of the new regime.

Matthew Pascall is Temple Legal Protection’s Senior Underwriting Manager for Commercial ATE/Litigation Insurance.

Paul Bennett is a Solicitor and Partner at Bennett Briegal LLP a niche law firm advising other law firms. Paul’s book on the new SRA regime can be purchased here http://www.lawbriefpublishing.com/product/newsracodes2019