Closure of Solicitors Indemnity Fund delayed
The SRA announced on 15th June 2021 that the plans to close the Solicitors Indemnity Fund (SIF) would be shelved for 12 months. https://www.sra.org.uk/sra/news/press/sif-extension-2021/
This delay follows extensive lobbying by the Law Society. The Society has been alarmed by the potential consequences for negligence claims arising after the mandatory six years run off cover has elapsed for closed firms. This cover has typically been provided by the Fund. Without cover, former principals of firms, their estates and even individual employees may be personally liable for losses from any claims that are made.
Simon Davis, president of the Law Society commented: “While we welcome the one-year delay, it does not solve the problem and our previous advice remains valid; firms that are currently covered by SIF, in run-off or contemplating closure, should be talking to their brokers and trying to come to an arrangement that will provide them with the ongoing cover they require when SIF does close to new claims next year. We had all hoped that a market would develop for reasonably priced post six-year run-off cover (PSYROC), but a hardening market has meant that the industry has been reticent to take on new risks. That means that there was a real danger that the closure of SIF at the end of September could leave former principals personally exposed to claims relating to work that their firm had done, perhaps decades in the past.”
The Law Society and the Solicitors Regulation Authority will now work together with insurers to try to find a practical solution that will protect former principals and their clients once SIF finally does close to new claims. The SRA has strongly urged those affected to engage in the consultation work as it develops a possible solution.
Affordability of the mandatory run off premium already poses a very significant problem for firms and their principals wishing to close and retire. It remains to be seen whether a credible and affordable policy can be incepted before the end of the year of the extended SIF and whether those in retirement can be alerted to this risk and take action accordingly.