SRA comes under pressure to extend Solicitors Indemnity Fund cover past 2020
The SRA could look again at whether to extend the post-six years run-off Solicitors Indeminity Fund cover past this September’s planned closing point.
The regulator has long intended to close the Solicitors Indemnity Fund (SIF) this year and effectively let the market handle claims going back further than six years.
But the Law Society has urged a rethink in the light of the coronavirus pandemic making it so much more difficult for smaller firms to secure professional indemnity insurance.
The SRA board has now requested that the Solicitors Indemnity Fund Limited, which runs the scheme, conducts an actuarial analysis of the potential exposure if the scheme were to be extended up to three years.
A decision on whether to keep SIF open would follow at a future board meeting before the September cut-off date. Alternative options may also be explored, including using existing resources available in the SRA’s compensation fund to meet claims falling outside the run-off period.
Currently, law firms receive run-off cover as part of their PII which covers them for claims lasting for six years. This protects clients and partners who may otherwise be exposed. The problem comes when those six years have elapsed, with around 11% of claims made after the mandatory period.
Conveyancing, wills and trusts and child personal injury are the types of legal work most at risk of historic claims being made.
SIF has previously provided extra cover for claims after the run-off, but without it firms may be personally liable for losses from any claims that are made.
The Law Society argued back in 2014 for an extension of the 2020 closure date, only for the SRA to proceed with the current timetable two years later.
Now the chair of the Law Society board has written to his counterpart at the SRA saying the current extraordinary circumstances make it appropriate and necessary to extend past 2020. The letter highlighted concern that the hardening of the PII marker was likely to be exacerbated by the Covid-19 crisis, with no insurers developing post-SIF products and most reluctant to extend cover beyond six years.
The SRA said its anecdotal evidence was that there are very limited options for purchasing alternative cover to protect firms after September 2020. This would leave clients reliant on recovering directly from individuals.
Kindly shared by The Law Society Gazette