Solicitors Indemnity Fund approaches last run-off years on reduced panel
SIF expecting to deal with 200 cases before closure in 2020
The Solicitors Indemnity Fund has reduced its number of panel firms from 11 to just four as it approaches the final three years of its run-off.
The panel, set up in 1987 with 20 firms, is responsible for defending claims brought against closed firms after their six-year professional indemnity run-off cover has expired. It was cut from 20 to 11 firms when the decision was taken to put SIF itself in run-off in 2000.
The remaining four firms are: Bond Dickinson, Clyde & Co, Kennedys, and Weightmans.
SIF paid out a total of £2bn compensation in the ten years between 2004 and 2014, according to SRA research published in October last year.
A spokesperson for the fund said the number of claims has been going down in the past few years and that fewer still were expected in the fund’s twilight years.
Between 1987 and 2017, he said, SIF dealt with more than 212,000 claim notifications, of which more than 65,000 were referred out to the 20-firm panel. Most of the £2bn payout concerned cases notified when SIF was active in providing indemnity cover, before it entered into run-off and before the open market arrangements commenced in 2000.
‘Since 2000, SIF has been concentrating on resolving all its outstanding cases and this task is now virtually complete. The fund’s focus is now on dealing with the claims expected to be received arising out of post-six-year run-off matters,’ he said.
This extended cover, which will expire on 30 September 2020, is provided by SIF for practices previously insured in the open market which had ceased without successors but after the six-year run-off provided by market insurers had lapsed.
‘Our analysis indicates that the SIF can expect to receive approximately 200 post-six-year run-off claims (with value) of which approximately 60 per cent are expected to be conveyancing-related and 25 per cent will-related matters,’ the spokesperson added.
‘This is due to the potential long tail nature of will cases and as a consequence of limitation in certain circumstances not beginning to run until the death of a testator. It will be the task of the new panel to deal with these cases.’
The SRA is currently looking into a new indemnity framework as part of a wider reflection on barriers to entry into the regulated segment of the legal services sector.
The regulator indicated in early 2016 that it was considering a change to the minimum terms and conditions for professional indemnity insurers. Among the options are: reducing the requirement to provide a six-year run-off cover, capping claims, and exempting insurers from paying up on claims where firms haven’t purchased run-off cover.
The SRA’s research was produced in response to a request by the Legal Services Board to provide more evidence in support of the proposals.
The report showed that one in five claims resulted in a payout, with conveyancing being the sector most affected by claims – although 98 per cent of claims were for less than £520,000.