After an insurer pays a claim, it ordinarily steps into the insured's shoes to recover from anyone responsible - the right of subrogation. The Solicitors Regulation Authority's Minimum Terms and Conditions place limits on how far a solicitors' insurer can exercise that right. The design keeps client protection intact and stops the insurer from turning on the firm's own innocent people after meeting a claim.
Under the MTC, the insurer's right to recover against a firm's employees is restricted, except where the employee was dishonest or fraudulent. An innocent employee who made a mistake is not pursued by the firm's insurer for the cost of the claim. This reflects the wider philosophy of the regime: liability for honest error is insured and absorbed, not passed down to individuals. Only where the dishonesty carve-out applies does the insurer retain a clear route against the person concerned.
The MTC also addresses set-off. In broad terms, the insurer cannot use money it owes on a claim to offset amounts the firm owes it, in a way that would leave a claimant short. The obligation to pay the claim in full stands on its own, separate from any account between insurer and firm over premium or excess. This preserves the core promise that a client with a good claim is paid, whatever the state of the commercial relationship between the firm and its insurer.
The restrictions protect the innocent, not the guilty. The insurer keeps its recovery rights against a dishonest insured and against genuinely responsible third parties - for example another professional whose negligence contributed to the loss. So an insurer that has paid a client can still pursue a negligent sub-contractor, expert or other adviser through subrogation. The limits bite only on recovery against the firm's own innocent people.
The subrogation restrictions complete the picture built up across the MTC: clients are paid first and in full, innocent individuals are protected, and the cost ultimately falls where it should - on the wrongdoer or on the insurance the firm has paid for. This is a coherent scheme rather than a set of isolated clauses, and it is why solicitor cover under the compulsory regime is regarded as robust. Surveyors face subrogation questions of their own under the RICS minimum requirements, drawn out in our surveyors' PI guide. For the way these provisions fit together, see 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.