The Importance of Management Liability Insurance
Protection for your firm’s leadership teams and compliance officers against personal liabilities and fines
Whilst a firm is responsible for dealing with any financial or regulatory sanctions against it, it is essential to note that a regulated officer or an owner/director of a law firm facing a claim can be held personally liable and cannot evade responsibility by relying on the firm’s business structure or ownership status. This means they are accountable for any personal fines resulting from breaches of their regulatory duties or responsibilities.
Therefore, the importance of Management Liability Insurance – sometimes known as Directors and Officers (D&O) Liability Insurance – and the protection it provides for individuals, as well as the protection for the corporate entity, has never been more important.
The Solicitors Regulation Authority (SRA) has upheld its commitment to pursuing firms and regulated individuals in breach of their responsibilities, and as a result, sanctions are increasingly being imposed, not only on firms but also on individuals, leading to individual fines in many cases. You can read about examples of this can via these links:
https://www.sra.org.uk/consumers/solicitor-check/recent-decisions/
https://solicitorstribunal.org.uk/judgments/
Having Management Liability insurance isn’t a mandatory requirement in the same way that firms and solicitors regulated by the SRA are obligated to have Professional Indemnity Insurance (PII), but more and more firms are arranging the cover to provide the individual protection for firm’s leadership teams and compliance officers against these personal liabilities and fines.
What Protection does Management Liability insurance provide?
Directors and officers can be held liable for their own actions, and inactions, as well as the actions of their co-directors or staff they are responsible for. Below we provide an overview of some of the core aspects of this type of cover, and how it can protect the firm and directors and officers against individual claims:
Protecting Personal Assets of Partners and Directors
Regardless of a firm’s structure, it cannot shield directors or owners from personal financial liability. Claims arising from breaches of duty or regulatory scrutiny may result in partners or directors being held personally financially responsible. This means that a director’s personal assets, including savings or their home, could be at risk. Management Liability Insurance can offer a protective buffer against such personal financial sanctions, protecting individuals against such financial exposures.
Protection For Your COLP and COFA
The roles of the officers, including the Compliance Officer for Legal Practice (COLP) and the Compliance Officer for Finance and Administration, are always under the watchful eye of the SRA. As previously mentioned, the regulator is keeping up with its promise to ramp up audits and investigations. From procedural lapses to the mismanagement of client accounts, scrutiny can lead to costly and lengthy investigations, as well as the potential for cases to be brought before the Solicitors’ Disciplinary Tribunal. Management Liability Insurance can cover legal defence costs or the cost of support from outside experts during SRA inquiries or audits. Should an investigation result in financial sanctions, the cover can protect the officers who may be liable for personal fines.
Employment Practices Liability
Even if a firm practices in employment law, it would not be immune to workplace disputes. From claims for wrongful or constructive dismissal, harassment, or bullying to discrimination and breaches of employment contract claims, the cost of defending these claims can be significant. Management Liability Insurance, which can include Employment Practices Liability, protects the firm or insured person by helping to cover legal fees and potential settlement agreement costs.
For a more detailed overview of what can be included in a policy, speak to one of our specialist brokers who can ensure they find the right policy for you.
Legal Industry Insurance Broker Specialists
At PIB Insurance Brokers, we are committed to securing the best terms available in the market, which we achieve by careful planning and market leverage. Should you wish to investigate Management Liability Insurance for the first time, we will be pleased to help. Equally, if you already have cover, we will be pleased to review it for you and discuss the most effective ways of maintaining a stable programme.
Client Academies
PIB will be hosting free-to-attend Client Academies designed to support law firms in navigating key areas of compliance, risk, and regulation. These sessions offer practical advice to help mitigate risk and protect your business.
Our next legal seminars, taking place on Thursday 20th and Wednesday 26th November in Derby and London, will cover:
- RA AML enforcement and rising sanctions
- Cyber threats and how to defend against them
- Regulatory hot topics, including supervision
We will provide refreshments and give you the opportunity to network with our experts to discuss any specific issues that may be on your own particular agenda.
To register, please contact Jay.Bajaj@pib-insurance.com