Closure of old mutual fund leaves retired solicitors exposed
Former owners of law firms that shut in the past two decades could be exposed to huge bills for new claims when the old mutual Solicitors Indemnity Fund (SIF) closes later this year.
SIF ends on 30 September, 20 years after solicitors voted to move from a mutual system of professional indemnity insurance (PII) to a market-based model. Since then, SIF has provided supplementary run-off cover for firms that have closed, protecting clients, partners and staff once their mandatory six-year run-off period comes to an end.
The old mutual fund has already been given two reprieves―it was originally due to close to new claims in 2017 and then 2020, but was kept open following Law Society lobbying on behalf of its members.
Once it closes, any new claims against a firm that ceased trading without a successor practice will be uninsured if the six-year run-off cover has expired and the former principals haven’t made alternative arrangements. This means the former partner would be personally liable.
‘Make no mistake, there is a significant risk of claims arising more than six years after firms cease operations, with data suggesting over 10% of claims are made outside the SRA’s mandatory run-off period,’ Law Society president I Stephanie Boyce said.
‘If you practised in areas such as conveyancing, wills and trusts, child personal injury settlements or matrimonial property, claims can occur decades after work was completed. You may want to contact your broker to see if they can arrange replacement cover. This would not have to be on the Solicitors Regulation Authority’s minimum terms, and less comprehensive cover may meet your needs.’
However, she warned many firms would struggle to find appropriate cover on the open market, especially where there were ‘factors such as poor claims histories’ and ‘having worked in areas with higher risk of late-arising claims’. Boyce said the Law Society was searching for workable alternatives but, as the representative body, had no powers regarding indemnification; therefore, members and former members should prepare for the possibility that no broad solution can be found.
Email SIF@lawsocietySIF@lawsociety.org.uk.org.uk to keep informed of any updates.
