The Insurance Act 2015 and Consequential Changes to the Minimum Terms and Conditions of PII
The Law Society responded to the Solicitors Regulation Authority's (SRA) consultation on proposed changes to the SRA minimum terms and conditions (MTC) of the professional indemnity insurance rules, to bring the MTC wording into line with the Insurance Act 2015, when it comes into force in August 2016.
The proposed MTC changes will replace references to 'non-disclosure' with 'failure to make a fair presentation of the risk'. The SRA consultation document explains that the changes are limited to necessary consequential changes in the language of the MTC clauses 4.1 (No avoidance or repudiation) and 7.2 (Reimbursement).
The Society has requested the SRA, in advance of implementing the proposed changes, to provide guidance for the profession to explain the meaning of, and reasons for, the changes. There has always been the duty of utmost good faith to disclose facts, which a prudent underwriter would consider relevant when rating the risk of a firm - it is just the language that has changed in the new Insurance Act.
The need for guidance is evidenced by recent confusion in the trade press about the implications of the change in wording. The Society has also asked that the guidance should explain the meaning of the concept of a breach of the duty 'to make a fair presentation of the risk' in the context of the MTC.