Successor practice under the SRA MTC: run-off or succession
Category: Solicitors and law firms · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~7 min read
Why this is the question in every law firm deal
Professional indemnity for solicitors is claims-made and long-tail. A firm that stops trading today can be sued for years afterwards on work done years before. The MTC deal with that by making run-off cover automatic rather than optional — but run-off has to be paid for, usually as a single premium at cessation, and the cost of it is frequently the item that decides whether a small firm can afford to close in an orderly way at all.
Succession changes the arithmetic. If another firm becomes a successor practice, the past liabilities can be picked up under that firm’s ongoing policy instead. No run-off premium falls due at cessation — but the successor’s insurer now carries the history, and that has its own price at the successor’s next renewal.
What the Minimum Terms require
The MTC, which sit within the SRA Indemnity Insurance Rules, require the insurer to extend the period of insurance on cessation for an additional six years, ending on the sixth anniversary of the date on which the period would otherwise have ended (clause 5.4). That is the six-year run-off obligation, and it is a term of the policy rather than something the firm negotiates at the time.
Clause 5.5 provides the alternative. The insured firm may elect, before cessation, whether it wishes the ceased practice to be insured under run-off cover, or — provided there is insurance complying with the MTC in relation to a successor practice — to be insured as a prior practice under that successor’s insurance.
Two things follow from the wording. The election is made before cessation, not afterwards; and it depends on there actually being MTC-compliant insurance in place for the successor practice. Neither condition is a formality.
What makes a firm a successor practice
This is defined in the SRA Glossary, and it is not a matter for the parties to agree between themselves. The definition works by identifying practice ‘A’ (the practice succeeded to) and practice ‘B’ (the successor), with “transition” meaning a merger, acquisition, absorption or other transition which results in A no longer being carried on as a discrete legal practice.
B is a successor practice to A where B is or was held out, expressly or by implication, by B’s owner as being the successor of A or as incorporating A — whether on notepaper, business cards, electronic communications, publications, promotional material or in a statement to a regulatory or taxation authority. The definition then adds a series of alternative routes, including where a sole practitioner whose practice was A becomes a principal (or, for transitions on or after 1 September 2000, a principal or employee) of B’s owner; where a recognised or licensed body that owned A becomes a principal of B’s owner; where the majority of the principals of A’s owner become principals of B’s owner; and, where only some principals move across, a further set of tests looking at whether B trades under the same or a substantially similar name, from the same premises, or has acquired A’s goodwill, assets or liabilities, or taken on the majority of A’s staff.
The practical point is that succession can happen by accident. A firm that takes on a team, the name, the office and the client files may find it has become a successor practice without ever having intended to, and without a single document saying so. The full and current text of the definition should be read before relying on any summary of it, including this one.
The commercial trade-off
Run-off means the ceased firm’s history stays with its own insurer, ring-fenced, for six years. The cost is a single premium at cessation, often a multiple of the last annual premium, payable by a firm that has just stopped earning. The benefit is a clean line: the acquiring firm’s own programme is not exposed to the acquired firm’s past.
Succession means no run-off premium at cessation, but the successor’s insurer inherits the prior practice’s claims history and exposure. That shows up at the successor’s renewal, in the presentation, in the underwriting questions and potentially in the terms. It also means the successor’s limit and excess are shared between its own claims and the prior practice’s.
Neither is automatically better. What is never a good outcome is discovering after completion that the position is different from what everyone assumed.
Due diligence that actually matters
Before any merger, acquisition or team move, three things need establishing. What is the target’s claims and circumstances history, including notified circumstances that have not yet become claims? What does the target’s current policy actually say, including any excess layers and any special terms? And what is the intended succession position — run-off or election — agreed in writing, with the insurers of both firms told before completion rather than after?
Notified circumstances deserve particular attention. A circumstance properly notified to the ceased firm’s insurer is generally the responsibility of that insurer, whatever happens afterwards; one that was known about but never notified is a problem that travels.
Where the deal is a rescue of a firm in difficulty, the picture is different again, and the relevant reading is our guide to what happens when solicitors’ PI insurance is not renewed.
Practical points
Make the election before cessation and record it. Clause 5.5 requires it to be made before the practice ceases; leaving it to be sorted out afterwards is how firms end up with a run-off premium nobody budgeted for.
Do not assume you can avoid succession by saying so in the sale agreement. The Glossary definition looks at holding out, personnel, name, premises, goodwill, assets, liabilities and staff. A contractual denial does not displace facts.
Tell both insurers early. An election that depends on there being MTC-compliant insurance for the successor is only as good as the successor’s insurer’s willingness to have it.
Frequently asked questions
How long is run-off cover under the SRA Minimum Terms?
Six years. MTC clause 5.4 requires the insurer to extend the period of insurance for an additional six years, ending on the sixth anniversary of the date on which the period of insurance would otherwise have ended.
Can a successor practice replace the need for run-off?
Yes. Under MTC clause 5.5 the insured firm may elect, before cessation, for the ceased practice to be insured as a prior practice under the successor practice’s MTC-compliant insurance, rather than under run-off cover. The election has to be made before the firm ceases and depends on that successor insurance being in place.
What makes a firm a successor practice?
The SRA Glossary definition. In outline, it turns on whether the new practice is held out as being the successor of, or as incorporating, the old one; and on a series of alternative tests involving where the principals went, and whether the new practice uses the same name or premises or has taken on the old practice’s goodwill, assets, liabilities or majority of staff. It is a factual test, not something the parties can simply agree.
Who pays for run-off?
The ceasing firm, usually as a single premium at cessation. That is a significant reason why the succession election matters commercially: where there is a successor practice and an election is made, the run-off premium does not fall due in the same way.
Sources
- SRA Indemnity Insurance Rules and Minimum Terms and Conditions
- SRA Glossary — definition of successor practice
This page is general insurance information, not legal advice, and describes the position as at August 2026. Cover depends on the wording of the policy actually in force. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.