Solicitors have been warned to take protective measures against potential negligence claims in view of the September closure of the Solicitors Indemnity Fund (SIF).
The Law Society said the SIF closure could leave former law firm owners liable for losses for any new claims – even in the case of those who shut shop up to 20 years ago – unless the former principals made alternative arrangements
The SIF has provides supplementary run-off cover for law firms, partners, staff and clients after their mandatory six-year run-off period has come to an end.
Law Society of England and Wales president I. Stephanie Boyce warned that those who have retired or plan to retire, or have been employed by a firm that has closed without a successor practice, could become personally liable for claims arising after the firm’s run-off cover has lapsed.
“Make no mistake”, she cautioned, “there is a significant risk of claims arising more than six years after firms cease operations, with data suggesting over 10 per cent of claims are made outside the SRA’s mandatory run-off period.”
Boyce pointed that claims can arise decades after work was completed in areas including conveyancing, wills and trusts, child personal injury settlements and matrimonial property.
“Our current advice”, she added, “is that firms that closed without successor practices after 31 August 2000 should consider their exposure and – if warranted – investigate the possibility of alternative cover.” This would not have to be on the SRA’s minimum terms.
Boyce added: “Given the adverse conditions that currently prevail in the insurance market, it is unfortunate that many firms will struggle to find an appropriate solution.
“Factors such as poor claims histories, having worked in areas with higher risk of late-arising claims, and especially not having paid your run-off premium, are all likely to preclude a realistic prospect of finding supplementary run-off cover on the open market.
She acknowledged that the Law Society is aware of the difficulties “and making every effort to find a workable alternative”.
"However”, she added, “the problems are serious, complicated, and difficult to overcome, especially because… we have no powers with regard to matters of indemnification.”
The SIF closes on 30 September this year....