Successor practice rules and PI on a law firm merger or closure

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-05

When a law firm in England and Wales merges, is acquired or closes its doors, one question decides where years of potential liability land: is there a successor practice? The answer determines whose professional indemnity (PI) insurer picks up claims about the old firm’s past work — and whether anyone has to buy expensive run-off cover. This guide explains the concept and points you to the rules that govern it. It is general information, not legal advice on a specific transaction.

What “successor practice” actually means

The phrase is not a loose description — it is a defined term inside the SRA’s Minimum Terms and Conditions, which every qualifying PI policy for a solicitors’ firm must incorporate. The MTC sits within the SRA Indemnity Insurance Rules. The definition exists to make sure that when a firm ceases, the liabilities attaching to its historic work do not simply evaporate: they either follow the business into a successor, or they crystallise into a run-off obligation on the ceasing firm’s insurer.

Broadly, a successor practice is a firm that takes over another firm’s business (or the bulk of it) in circumstances the MTC recognises — for example by holding itself out as continuing the earlier practice, carrying on under a materially similar name, or being made up largely of the same principals. The test is objective: a firm can become a successor practice without intending to, and the label carries real insurance consequences. Because the precise wording is technical and can change, you should read the definition in the SRA rules currently in force before relying on it.

Why it matters on a merger or closure

Under the MTC, a solicitors’ PI policy covers not only the firm’s own work but also the past work of any practice to which it is a successor. That single mechanism drives the whole issue:

• If there is a successor practice, the successor’s live insurer generally responds to claims arising from the predecessor’s historic matters. The old firm may not need to buy separate run-off.
• If there is no successor practice, the ceasing firm goes into run-off. Its final insurer must, under the MTC, provide run-off cover for a set minimum period after closure — commonly cited as six years — and a run-off premium usually falls due.

This is why the successor-practice question is negotiated hard in mergers and acquisitions of legal businesses. Being deemed a successor means your insurer inherits an unknown tail of someone else’s past exposure; not being a successor can leave the closing firm facing a substantial run-off cost. Where two insured firms are both potentially on risk for the same historic work, the MTC also contains “double insurance” provisions that apportion the claim between insurers, and rules for which policy responds first. Confirm the current position with the SRA rules and your insurer.

Successor practice vs no successor: what changes

The illustrative structure above is a starting point only. The definitive answer for any transaction turns on the exact MTC wording and the facts of the deal.

The minimum cover behind all of this

Every point above assumes MTC-compliant cover is in place. The SRA does not leave the sum insured to the firm’s discretion: it sets a minimum level of cover per claim, with the applicable figure depending on the firm’s structure (for example, whether it is a partnership or an incorporated practice). Rather than rely on a figure quoted online, check the minimum sum insured, the run-off period and the current definitions directly in the SRA Indemnity Insurance Rules and the Minimum Terms and Conditions in force at the date of your transaction. Many firms also buy cover above the SRA minimum — illustrative options such as £1m, £2m or £5m of additional layers are common — because the mandatory floor may not reflect the value of the work being carried out.

If you are planning a merger, acquisition or closure, an early conversation about how the successor-practice rules apply to your firm can save a great deal of cost and argument later. Talk to Apex about your PI position →

Practical steps for firms

• Establish early whether the deal is likely to create a successor practice under the current MTC definition — take legal and insurance advice, not assumptions.
• If a successor exists, notify the successor’s insurer and confirm in writing that it accepts the predecessor’s past liabilities.
• If no successor exists, arrange and price run-off cover before the firm ceases — leaving it late narrows your options.
• Document who is responsible for historic matters in the merger or sale agreement, so the insurance position and the contractual position line up.
• Re-check the SRA rules at the time of the transaction; definitions, minimum terms and run-off requirements can be updated.

Common questions

Who decides whether a firm is a “successor practice”?

It is determined by the definition in the SRA’s Minimum Terms and Conditions, applied to the facts of the transaction — not by the firms simply agreeing a label. Because the outcome is objective and technical, take legal and insurance advice and read the current SRA rules.

Does a successor practice remove the need for run-off cover?

Generally, while the successor holds MTC-compliant cover, its insurer responds to the predecessor’s past work, so separate run-off may not be triggered. If there is no successor, the ceasing firm’s final insurer must provide run-off for the MTC minimum period and a run-off premium usually applies.

What is the minimum PI cover an SRA-regulated firm must hold?

The SRA sets a mandatory minimum sum insured per claim, which varies with the firm’s structure. Because figures and terms can change, check the exact minimum, run-off period and definitions in the SRA Indemnity Insurance Rules and Minimum Terms and Conditions currently in force. Ask Apex for a review →

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for your policy wording.