SIF provided compulsory professional indemnity cover for solicitors from 1987 to 2000, when the profession switched to an open market model of insurance. It is a requirement that all policies include provision for at least six years run-off cover if the firm closes without a successor practice. About 90% of run-off claims are made within six years, and the most common type of claim faced by a solicitor is professional negligence, which has a six-year limitation period.
SIF, which has funds of about £22m, also provides run-off cover to firms once their six-year run-off period finishes, which is known as post six-year run-off cover (PSYROC). This provides continuity of protection for the client as well as peace of mind for retired solicitors.
The SRA predicts about 45 claims in 2023, lessening to 31 in 2029. It acknowledges the risk of delayed retirement where solicitors are concerned about long-tail claims and the increased risk of disorderly closure and ‘poor outcomes for consumers’, in annex 3 of the consultation.
However, Anna Bradley, Chair of the SRA Board, said: ‘Our analysis, in the light of detailed evidence, shows that establishing or maintaining a regulatory scheme to deliver ongoing post six-year run-off cover is unlikely to be proportionate in light of the level of consumer protection it provides.’
Calling for SIF to be retained, Law Society president I Stephanie Boyce said: ‘The average successful claim is over £34,000, which is a large amount of money for most people.
‘The consumers who will suffer will employ solicitors on a reasonable assumption that they would have comprehensive protection if something went wrong. The SRA is suggesting that this comprehensive protection is removed, but it is yet to demonstrate that the removal of PSYROC will have any material impact on the cost of legal services or lead to any improvement in the market for legal services.’
The consultation ends on 15 February 2022, and can be viewed here.
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