A levy of £240 per firm - already mooted but rejected by the regulator - would protect retired practitioners indefinitely from potentially ruinous negligence claims, the Law Society said today. In a joint statement with a consumer watchdog strongly opposing the Solicitors Regulation Authority's decision to close the Solicitors Indemnity Fund (SIF), Chancery Lane says the levy would have no impact on fees charged to consumers.
The indemnity fund, which closed to new entrants in 2000 but still provides post six-year run-off cover for firms that have shut down, has been under threat since 2013 when the SRA decided upon closure. The regulator says the cost of running the fund, compared with the volume and value of claims - an average of £34,000 - is disproportionate to its benefit.
The fund had net assets of £22.48 million at 31 October 2020.
In a rare joint statement, Chancery Lane and the Legal Services Consumer Panel say today that closure would weaken consumer protection. The regulator 'has not shown how ending this protection has any benefit to consumers, either in terms of reducing the price of legal services or increasing consumer choice, and its suggestion that the Law Society, as the representative body of the profession, could provide a similar level of consumer protection through a newly created fund is misleading,' the two bodies state.
The Society supports the continuation of the fund backed up by a levy on law firms of £240 per year, which calculations demonstrate would have no material impact on the fees charged to consumers. Last year, the solicitors Sole Practitioners Group heard that an extra £10 per practitioner a year would sustain the fund.
Law Society president I. Stephanie Boyce said: 'Our profession is happy to pay for SIF. Any knock-on cost to consumers will have negligible or no impact on the price of legal services – but even if they were, the increases would be tiny, measured in the tens of pence.'
Clients go to solicitors for advice during the most important events in their lives, she noted. 'They do so confident in the assumption that solicitors are highly qualified and regulated. On the rare occasions something goes wrong, consumers believe their solicitor is adequately and appropriately insured, and that they will be compensated for any losses.
'Ending SIF would immediately stop long-term protection for consumers exposed to long-tail risks.'
Consumer panel chair Sarah Chambers said that the administration costs of the fund 'seem remarkably high'. Nevertheless, 'we remain very concerned that the proposal to close the fund may be taken forward without proper consideration of the impact on consumers of "unknown" mistakes made many years ago, and of how protection could be maintained through continuing the fund or replacing it with an alternative which offers a similar level of protection. The SRA should think again.'
- The Law Society's Risk and Compliance Annual Conference will take place Friday 25 March, as a hybrid event online and at the Law Society, London. We will examine the current compliance issues that are affecting firms and legal departments through a mix of plenary sessions and a choice of concurrent workshops. https://www.lawsociety.org.uk/risk-and-compliance-2022
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