Solicitors are given a break from SIF payments

Law firms are set to enjoy their first year without having to make payments to the Solicitors Indemnity Fund (SIF) after it emerged that the fund's shortfall has been cleared two years earlier than anticipated.

The Law Society Council will next week be asked to approve a nil contribution for 2003/4 after the SIF's financial position improved.

However, a future call on firms has not been ruled out.

Firms have been paying off the shortfall since 1998 after it emerged that the SIF had underestimated its claims liability by 450 million.

A seven-year plan of payments was then implemented.

The outcry over the shortfall ultimately led to the SIF's demise and the profession entering the open market.

The SIF has an estimated outstanding claims liability of 301 million, but its unaudited accounts show a surplus on that of 34.3 million to cover unforeseen developments.

In a paper to the council, the SIF board warned that there remains volatility in the figures and further collections cannot be ruled out.

It added that at some point, the SIF board and the Law Society's indemnity insurance committee may want to propose reinsuring the fund's residual liabilities, which - if approved by the council - may require a further contribution.

In light of this, the requirement that firms file a gross fees certificate will remain in place.

The Law Society committee has backed the recommendations.

Paul Marsh, chairman of the SIF board, said he was pleased to have good news for the profession.

The earlier collection of the shortfall was down to several factors, he said, including provision for Y2K claims that never came.

There was also a sharp rise in protective reporting of potential claims ahead of the move to the open market, but a good number of these did not materialise.

Neil Rose