Calls by the Law Society for the SRA to extend the scheme that provides solicitors’ professional indemnity insurance post six-year run-off cover have been heard.
The SRA Board approved the proposals made by the Law Society to introduce rules to extend the scheme, but didn’t follow the suggestion of putting a cap of £10 million on the cost to the profession of the extension.
The SRA has extended the scheme until 2020. The scheme is managed by the Solicitors Indemnity Fund (SIF) and funded collectively by the entire profession. The Law Society argued that the extension was necessary to give security to recently retired and retiring solicitors.
Desmond Hudson, Chief executive of the Law Society commented:
“Extending the run-off cover is a welcome step by the SRA and one which reflects what the Law Society has been calling for. If approved by the LSB, the extension will give retiring solicitors the peace of mind and give firms considering leaving private practice and solicitors contemplating retirement greater certainty over the future, and provides valuable protection for retired solicitors, the wider profession and the public.
“The Society argued that this cover should be limited by a cap. There is a risk to the profession in a form of a possible future levy if there are insufficient funds to meet claims which under this plan are unlimited.
“The Law Society sought to ensure that the profession was not unduly exposed and suggested a cap that would limit cover only in the event of abnormally high level of claims within the three year period. This concern was not addressed by the Board, which raises questions about the decision-making process.”
The changes are to be submitted to the LSB for consideration. As well as the proposal to extend the run-off cover, the LSB will also consider a reversal of the SRA plans to extend the scope of insurance cover to include non-authorised SRA firms.
Desmond Hudson added:
“This is an improvement and is consistent with the intention expressed in the SRA’s 2011 Policy Statement, however, it still does not address our overarching concerns about the adequacy of the SRA’s consultation process since whether this is an appropriate role to be placed on the Compensation Fund is of fundamental importance. Given the importance of this matter we have raised our concerns formally with the LSB.”
The Law Society will continue to consider the impact on Group reserves and the risk to the profession of this cover, and how it should be funded and managed after 2020.
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