Despite calls from the Law Society to extend SIF cover by a further three years to 2023, the SRA Board, on 9 March 2016, announced its decision to end the existing SIF arrangements in 2020.
Currently, any firm that has closed since September 2000 without a successor can resort to the old Solicitors Indemnity Fund (SIF) for any claim made after the six-year run-off period. This arrangement is due to end in 2020. SIF closed in 2000.
The SIF says it has recently “noted a significant increase in post six year run-off claims in both frequency and value requiring adjustment to its ultimate expected liability positions. This means that although SIF has sufficient financial resources to meet all expected claims up to 30 September 2020, its surplus is unlikely to be sufficient to fund any further extension beyond that date. This has been taken into account by the SRA in reaching its decision.”
Some legal commentators have described the decision not to extend post-six-year run-off protection after 2020, as “real concern”. However, this ignores:
- The cost of continuing the SIF regime and the views of a large section of the profession in relation to this. In a recent survey, whilst almost half of those firms surveyed agreed there should be post six year run-off cover available to all ceased firms paid for by universal contributions from the profession, a quarter disagreed (this figure rose to 40% of large firms - 25+partners). The most common reason for disagreeing (given by 44% of firms) was that they do not believe they should have to pay for the negligence of other firms. A further 22% considered it to be a firm's responsibility to make sure they are insured.
- The opportunities it presents in terms of seeing what products and options might be available on the open market to produce a varied and competitive run off market.
Whatever the end result might be, this decision comes as a timely reminder to any firm and / or individual(s) who may be thinking of retiring or selling their practice to be alive to the implications of long term liabilities and plan accordingly to manage potential exposure.