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Insurance clampdown sees seven Midland law firms close

Four high street law firms in Birmingham, as well as practices in Wolverhampton, Coventry and Redditch, are among those forced to wind down following a purge by the Solicitors Regulation Authority (SRA).

Martin Allsopp

Seven law firms in the West Midlands have been forced out of business following an insurance clampdown.

Four high street law firms in Birmingham, as well as practices in Wolverhampton, Coventry and Redditch, are among those forced to wind down following a purge by the Solicitors Regulation Authority (SRA).

It comes after the firms were unable to secure professional indemnity insurance, protecting them against negligence claims, following a change in SRA guidelines.

The raft of closures was branded “a sad day for the profession” by Birmingham Law Society, with the sector already struggling under the weight of vast legal aid cuts and a fifth of businesses expected to close in two years.

A total of 136 practices nationwide are being forced to close and the regulator said that while most had co-operated the remainder operating outside regulations were “subject to ongoing robust action”.

The Birmingham firms that closed their doors were BA Solicitors, of Sparkhill, Brooks & Associates Solicitors, of Temple Row, Exlex Solicitors, of Handsworth and Kings Heath firm Nicholas & Co Solicitors.

Other firms in the region forced to close for not having insurance cover called PII following a mandatory renewal period are RS Gough & Co of Wolverhampton, Heer Manak of Coventry, and Sampson & Co, of Redditch.

Martin Allsopp, president of Birmingham Law Society, said the closures heaped pressure on an already beleaguered sector bracing itself for legal aid cuts.

“It is a sad day for the profession,” he said.

“The cost of PII is massive in some cases and what happens of course is as soon as you have a claim where insurers have to pay out what they do is increase the premium dramatically.

“Solicitors need a minimum of £2 million PII cover and if you don’t have that you can’t practise.”

“If you can’t pay the premium you have to close. That is what has happened here.

“These will have largely been proactive decisions to close, based on financial difficulties.”

The firms were forced to close after being given a 90-day extension by the SRA, until December 29, to secure cover or face immediate closure.

This comes after the regulator announced in 2011 it was removing its assigned risks pool – a safety net for firms unable to obtain cover on the open market.

The SRA would not discuss precise circumstances of any of the Midland firms but stressed they may have decided to close for a variety of reasons, ranging from being unable to obtain PII to sole practitioners retiring.

However, the regulator broke with tradition by publishing the names of the 136 firms and said it was doing so “in the interests of protecting consumers and third parties”.

Mr Allsopp said he felt the outlook for the profession, particularly as regards high street practices, continued to be grim.

“I do wonder where we are going as solicitors,” he said. “It has been estimated 20 per cent of all legal firms will close within two years, that is the effect of cuts and all the other legal issues.

“They will be forced to merge, close down or retire. You will always find big firms in city centres but this will affect the high street and people will lose their local solicitors in many areas. That seems to be the way we are going. You will see more city firms but less and less firms on the high street.

“The first the public will know about it is when they go to a solicitor and it is no longer there.”

When contacted by the Post, Roy Edginton of Exlex Solicitors, said as a small sole practitioner his turnover was insufficient to be able to obtain PII insurance from insurers and he was now looking to work for another firm.

Nobody was available for comment from BA Solicitors but a spokesman confirmed the firm had closed.

A recorded message at Brooks & Co said the firm had ceased practising at the end of October last year and nobody from Nicholas & Co could be contacted.

Angus Turner, a partner at the Birmingham office of Mills & Reeve, said the closures were not unexpected. He said that given there was now a commercial market in place each firm had to justify its own position, unlike the days when the cost of insurance was spread across the profession.

He said: “We are coming out of a pretty volatile economic period over the last six years and law firms, like many others, have faced cost pressures and professional indemnity renewal is just one of those..

“The fact we are seeing some law firms cease to practise is not a surprise. But the sole reason will not be the cost of PII, but the fact the firm has not got the business to meet that cost.”

Mr Turner said he believed the trend would be for more small firms to merge.

 
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