Closure of the Solicitors Indemnity Fund
All solicitors should be concerned by the forthcoming closure of the Solicitors Indemnity Fund, set up years ago to effectively provide insurance cover for solicitors against claims and the money in the Fund was provided by solicitors. Since the year 2000, solicitors have had to buy insurance on the open market and the Fund has only been used for claims against retired solicitors after their initial 6 years run-off cover has expired.
Under the Limitation Act, solicitors can be liable for 6 years after a former client becomes aware of a problem, with a maximum of 15 years after the conclusion of a case in most cases, so the 6 year run-off cover, which is all insurance companies have been prepared to offer, isn’t enough. Indeed in some types of case, liability lasts potentially indefinitely.
Of course any claim is traumatic, but the SIF was there to cover these claims. However, the Solicitors Regulation Authority, which controls the Fund and regulates solicitors, wishes to close the Fund on 30th September 2021. So far, no good reason for this has been put forward, it isn’t known what the money in the Fund will be used for and no alternative insurance cover has been able to be arranged by the Law Society, the governing body for solicitors, despite its effort over several years to persuade the insurance industry to come up with a suitable product.
The fact is that some types of work, conveyancing included, are seen as too risky by the insurers and they’re not interested.
The Fund remains robust and currently holds approximately £22M and has remained constant for several years due to good investment despite claims having to be met. The simplest and least expensive and most certain method of dealing with the problem is for the Fund to remain in place.
Thousands of solicitors are potentially affected by this. These are (i) retired solicitors currently in their 6 year run-off which will run out (ii) retired solicitors whose 6 year run-off has expired already (iii) currently established firms and new yet-to-be established firms who may be unable to dispose of their practices to successor practices which are willing to take over liability for claims (and the insurers of successor firms require to be consulted about this and may refuse to agree) (iv) former employees of categories (i) and (ii) against whom claims may be made (v) future former employees of category (iii).
The estates of deceased solicitors may also be claimed against so this nightmare doesn’t even end on death.
We are talking about potentially vast claims against solicitors for which they will be uninsured. In the field of conveyancing, buyers of properties may not sell for many years and may not realise until they sell that there are problems and may wish to pursue the solicitors who acted for them at the time of purchase. The Limitation Act provides for a 15 years maximum period in most cases, but that’s still a long time for potential claims to surface.
As we know, property prices can rise substantially in 15 years. As we know, mortgage lenders have frequently changed the goal posts as to what is and isn’t acceptable. Leasehold properties have been a particular problem. It’s no wonder insurance companies are not willing to take on this risk for longer than the initial 6 years from retirement.
To be plain, one is talking about elderly solicitors, possibly in care homes, possibly having lost mental capacity, having their remaining funds needed to support their care and retirement taken away. It would be a nightmare for most elderly solicitors to be faced with court pleadings and hearings with no backup.
Of course, if the solicitors have no money or assets, then the claimants won’t get anything, when they might have been able to have their claims met out of SIF funds. And even if the solicitors can pay, why should individual retired solicitors be hounded, wiped out and bankrupted when there is money there, at least for the time being, to meet claims? Why should their families after their deaths within the 15 years suffer the trauma of claims being made against them as the beneficiaries of deceased solicitors?
It’s abominable that the SRA is prepared to countenance being responsible for such outcomes but it appears so far that the SRA proposes to stand by its decision to close the SIF. The SRA incidentally have no responsibility for solicitors, but they are at least supposed to protect the public and this decision of theirs is only going to cause hardship to the public too.
Groups of solicitors have formed which are trying to persuade the SRA to allow the Fund to remain open. Further, the Legal Services Board have to approve the closure and they are of course being lobbied too as it has appeared that they propose to rubber stamp the SRA’s decision. And the Law Society is being lobbied to put pressure on the SRA not to close the SIF.
If you are or might be affected by this pending disaster, you are invited to contact the following email address so that you can join us in attempting to prevent the closure of the SIF: [email protected]
Gill Mather, retired solicitor formerly practising as Mather & Co Solicitors