Solicitors Indemnity Fund: Law Society responds to SRA's proposed next steps
The Law Society president said any new fund must meet three key principles
The Law Society has today responded to a Solicitors Regulation Authority (SRA) discussion paper on the future of the Solicitors Indemnity Fund (SIF), outlining three key principles for consumer protection in relation to negligence claims brought more than six years after a firm has closed.
The SIF is a scheme aimed at protecting consumers who suffer loss from the negligence of a solicitor, but cannot claim under the law firm’s indemnity insurance because the firm has been closed for more than six years with no successor. Post six-year negligence' losses are currently covered by the fund which had been due to close to new claims in September 2022.
Controversary has surrounded the SIF in recent years, as the SRA made its bid to scrap the scheme. Many legal professionals expressed concern over the plans, which forced the SRA to reconsider.
The SRA’s most recent discussion paper was published on 3 August 2022 and set out proposed next steps for the fund.
Law Society president, I. Stephanie Boyce, said: “We welcome the evolution of the SRA’s position on this important consumer protection matter and appreciate the opportunity they have provided for us to feed into the next stage of their policy development on post six year run off cover (PSYROC).
“The Law Society, alongside other stakeholders, argued strongly against the closure of SIF, but our main focus has always been ensuring the continuation of PSYROC and the full range of protections that it provides.
“We are pleased to see the SRA recognises that there is still a need for this type of cover to ensure consumers are protected”.
Boyce said the Law Society could support an SRA-run consumer protection fund, “but only if it provided the same like-for-like protection as SIF”.
She said any new consumer protection fund would need to 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.
“Expert analysis carried out on behalf of the SRA suggests that this should cost around £240 per firm per year, which need not have any effect on the price of legal services for consumers”, said Boyce.
“Second, any residual funds from SIF should be ring-fenced for the specific purpose of dealing with PSYROC claims, for the benefit of consumers and solicitors”. Finally, she said “any new arrangement should provide the same scope of indemnity cover that is currently provided by SIF”.
Boyce commented: “People go to solicitors for support and advice during significant events in their lives – the death or injury of a loved one, family breakdown, a house purchase or estate planning.
“They do so rightly confident that solicitors are highly qualified and regulated. Consumers trust their solicitor is adequately and appropriately insured, and that they will be compensated for any losses on the rare occasion something goes wrong. It is of paramount importance that trust and confidence are maintained.”
Commenting on the evolution of PSYROC policy, she added: “We want to reassure the profession that the SRA’s discussion paper should not be regarded as a substitute for a consultation. This was the regulator going out of its way to seek the opinions of interested parties before making any decisions about the content of their next formal consultation on this issue.
“The Law Society is grateful to have had the opportunity to contribute our views at this stage, and we welcome the regulator’s collaborative approach.
“The extension under which the SIF is still providing PSYROC runs until the end of September 2023, and the Law Society has requested a timetable from the SRA setting out how they expect this matter to progress to ensure appropriate protections will be in place come the beginning of October next year”.