In ordinary insurance, a material misrepresentation or non-disclosure can allow an insurer to avoid the policy from the outset, leaving the insured with no cover when a claim arrives. The Solicitors Regulation Authority's Minimum Terms and Conditions remove that risk for the compulsory layer. Under the MTC, an insurer of a solicitors' firm must not avoid or repudiate the policy, and must not cancel it, except in the narrow circumstances the Rules allow. This is one of the strongest client-protection features of the whole regime.
The MTC requires that the insurer will not deny liability, avoid the contract or reduce a payment on the ground that the firm failed to disclose a material fact or misrepresented one when the policy was arranged. The effect is that a client with a good claim is not left without recourse because the firm made an error on its proposal form. The insurer must still pay, and its remedy, where it has one, is against the firm rather than the claimant. This reverses the usual balance of risk under the general law, and it sits alongside the reforms brought in by the Insurance Act 2015 for commercial policies more generally.
The MTC does not leave the insurer entirely without protection. Where a firm has behaved in a way that would ordinarily entitle an insurer to a remedy - for instance by failing to pay a premium, or by non-disclosure - the insurer may be able to seek reimbursement from the firm after meeting the claim. The key structural point is the sequence: the insurer meets the claimant first and recovers from the firm afterwards, rather than declining and leaving the claimant unpaid. The firm therefore carries the consequences of its own conduct, but the client does not.
Cancellation of a qualifying policy is tightly constrained. An insurer generally cannot cancel mid-term at will. The Rules recognise limited situations - such as replacement of the policy by another qualifying policy - in which cover can come to an orderly end, but the general position is that the firm's cover is stable for the period of insurance. This stability is what allows a firm to give clients confidence that cover will respond.
The non-avoidance principle is a defining feature of compulsory solicitor cover and explains why the regime is often held up as a model of client protection. Financial advisers operate under a different framework, where the interaction between the firm's PI cover and the Financial Ombudsman Service and FSCS is central - our IFAs' PI guide explains that structure. For solicitors, the full set of protections is drawn together in the solicitors' PI insurance guide.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.