Successor Practice Advice


What are the consequences of becoming a Successor Practice?

The term ‘Successor Practice’ was coined to determine which insurer covers claims against firms following merger or takeover. However, firms can unwittingly fall into the definition, leading to significant liability for claims of the ‘prior practice’, or even worse, the catastrophic failure of the firm, having been unable to obtain insurance on renewal.

The term is defined in the SRA Glossary 2019 but there’s leeway in how it is applied.

Taking on just one new fee earner could lead to Successor Practice status. With the often prohibitive cost of run-off insurance, some individuals will be incentivised to avoid the premium by capturing a firm as a Successor Practice.

How do I avoid becoming a Successor Practice?

There are methods of avoiding the status, including :-

  • Ensuring the Prior Practice effects run-off, in the way envisaged by the Successor Practice definition; or
  • Otherwise, avoiding the categories listed in the definition.

Due diligence is key. Even if run-off cover is effected, it’s important to ensure that it’s handled correctly, and the terms not breached.

How can we help?

We can :-

  • Guide you through the options to maximise the chance that your firm will not be treated as a Successor Practice;
  • Give you an expert written opinion, for insurance purposes, whether e.g. following an acquisition, your firm will be deemed a Successor Practice; or
  • Represent you in proceedings brought by an insurer or another firm arising from the application of the definition.

Robert Forman in our team, co-authors The Law Society's flagship publication, The Solicitor's Handbook (editions 2024, 2022 and 2019) and is author of the chapter, among others, on professional indemnity insurance including the application of the Successor Practice rules.

Case study

We provided a written expert opinion to a top 100 law firm on its potential liability upon the intended acquisition of another entity with potentially significant claims liability, with insurance failure. The firm used the advice to satisfy its insurers prior to completing the acquisition.

If you want us on your team, e-mail or speak to Andrew Blatt on 07973 752498, Robert Forman on 07976 562236 or Nick Trevette on 07976 795014.