The Solicitors Regulation Authority has bowed to pressure to extend the cut-off for a scheme that covers historic claims against the former owners of shut-down firms.
The regulator announced today it had agreed to extend by a year the use of the Solicitors Indemnity Fund (SIF). The money covers firms for claims made after the mandatory six-year run-off period for professional indeminity insurance.
It had been planned for some time that the fund would close in September, but the Law Society urged this to move the date in the light of the difficulties faced by smaller firms to secure insurance during the pandemic.
An SRA board meeting last week agreed to extend the use of the SIF for post six-year run off cover for another 12 months until 30 September 2021. It rejected the option push the closure back by three years, saying this would not be affordable.
The board recognised that alternative products to the protection afforded through the SIF have been slow to appear. Anecdotal evidence appeared to suggest this had been exacerbated by the current hardening market and the insurers’ desire to focus on mandatory cover.
Anna Bradley, chair, said: ‘We know that the insurance market has been hardening and that products for post six-year run-off cover have been slow to develop. This further extension of the use of SIF to provide that extra cover - which is on top of our regulatory requirements - gives firms and insurers more time to focus on developing additional insurance for those who are interested.’
While most claims against firms are covered by the six years of run-off, around 11% of claims are made after the mandatory period, potentially leaving owners personally liable. The most common types of legal work exposed to historic claims are conveyancing, wills and trusts and child personal injury cases.
Simon Davis, Law Society president, said firms should talk to their brokers and trying to come to an arrangement over ongoing cover.
He said: ‘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. Solicitors will be relieved, because with the breathing space this pause provides, the Law Society and the SRA can 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.’