Hundreds of law firms have been given notice that they may have to stop taking new business because of a failure to renew their professional indemnity insurance (PII) – despite having successfully obtained cover, the Solicitors Regulation Authority admitted today.

It said that poor data from insurers had led it to email 1,863 firms warning them that no evidence of insurance had been provided when in the vast majority of cases firms were covered.  

The Law Society said it is ‘aware that a number of firms who have successfully renewed their PII cover have received letters from the SRA suggesting that this is not the case’.

A spokesperson said: ‘We understand that this may be because of discrepancies between the information given by insurers to the SRA and the SRA’s firms authorisation exercises. We are speaking with the SRA.

‘Their advice is that solicitors who have received such letters should, in the first instance, contact insurers to confirm that the insurer has them on the correct database.’

The SRA said in a statement that it had contacted 1,863 firms for which it does not have complete PII information, reminding them that they needed to check that they had renewed their policy for 2014-15.

‘Many of these firms have since told us that they do have insurance. We have told these firms that they need to contact their insurer so that the correct information can be forwarded through to us.’

Firms without insurance have to enter the ‘cessation period’, the second phase of the extended policy period, and would not have been able to take on any new business. A total of 1,863 firms were emailed, outlining that no evidence of insurance had been provided for them.

The regulator said that a number of firms within this group were ‘corporate bodies’ belonging to a larger firm and covered by its policy.

Paul Philip, chief executive, said: ‘This time of the year is already an exceptionally busy one for everyone, and we appreciate that a number of firms may have received an email from us that they believe was unnecessary.

‘However, it is vital to check and double-check a firm’s insurance details because PII provides important protection for consumers. We will continue to work with firms and insurers to make sure that we have as complete a picture as possible.’

Calum MacLean, UK risk manager for broker Lockton, said he had received calls from law firm clients concerned that there had been some glitch in arranging cover and that there was a chance they might have been practising uninsured. 

‘What is disappointing is that when this issue was flagged to the SRA by insurers a week ago, nothing was done, and the result has been stress, worry and time wasted for all the firms affected. While I appreciate that the SRA’s role is not an easy one, this was a totally avoidable crisis.’