Related claims would also be subject to a cap. The Solicitors Regulation Authority (SRA) also want to drop proposals for the introduction of a hardship test.
The compensation fund protects clients who lose money due to dishonesty by a solicitor, or in circumstances where they cannot claim on a law firm’s professional indemnity insurance.
The changes are based on an earlier consultation in 2018 on both professional indemnity insurance arrangements and how the fund is managed.
The SRA would focus eligibility criteria on people most in need of protection, remove hardship tests, restrict applications to recipients of legal services from the solicitor involved, cap single claims to £500,000, cap the total amount for related claims, and bar claims where an insurance policy has been voided or has already paid out.
Paul Philip, SRA Chief Executive, said: ‘The Compensation Fund provides an essential safety net for those who need it, helping to maintain trust in the profession when things go wrong.
‘However, funding the scheme comes at a cost, which is borne by the wider profession and ultimately their clients. We have seen how significant risks in the market over recent years, including solicitor involvement in dubious investment schemes, have affected the Fund and contributions from the profession.
‘We want to strike the right balance between protecting clients’ money and making sure that the Fund remains sustainable for the future.’
The consultation, ‘Compensation fund reform’, ends on 21 April.
