While the Law Society has been critical of previous SRA suggestions on indemnity cover, it showed support for the latest consultation, Consumer protection for post six-year negligence.
The SRA proposes maintaining consumer protection for post six-year negligence as an SRA regulatory arrangement providing the same level of cover as the Solicitors Indemnity Fund (SIF), and providing this protection through an indemnity scheme operating
under the direct control of the SRA so it can oversee operations, realise potential cost efficiencies and keep the costs and benefits of the scheme under review.
Responding, Law Society president Lubna Shuja said: ‘These proposals will enable consumers to claim compensation if there is a rare occasion when something goes wrong many years after a solicitor has provided legal advice.
‘Consumers trust their solicitor is adequately and appropriately insured, and that they would be compensated in the unlikely event that late-arising negligence were to be identified.’
However, Shuja said any new supplementary run-off cover arrangement must meet three key principles.
‘First, any new arrangement should continue to run as an indemnity scheme, which could be funded on an ongoing basis through a mandatory levy on firms,’ she said. ‘Expert analysis carried out on behalf of the SRA suggests that this should cost less than £240 per firm per year, which is unlikely to affect the price of legal services for consumers.
‘Second, any residual funds from the Solicitors
Indemnity Fund (SIF) should be ring-fenced for the specific purpose of dealing with PSYROC claims, for the benefit of consumers and solicitors.
‘Third, any new arrangement should provide the same scope of indemnity cover that is currently provided by SIF. We believe the proposals set out by the SRA for a new PSYROC scheme, operating under their direct control, could meet these requirements
and if that is achieved, we support the SRA’s proposed approach.’
Once the consultation process concludes, the SRA will need to make a rule change application to the Legal Services Board in order for the new arrangements to be in place by 1 October 2023.
However, five regional law societies, Birmingham, Bristol, Leeds, Liverpool and Manchester, expressed concern in their responses that other options were not considered in the consultation.
SIF is due to stop accepting new claims after September 2023―a deadline which has already been extended twice―after which solicitors and retired solicitors would have been personally liable for any new claims made if the SRA had not stepped in with a replacement scheme.
However, SRA proposals put forward previously for SIF to close with no replacement met with considerable alarm.
