Compensation fund faces £2.5m bill for uninsured law firms


SRA

SRA: number and value of claims will increase

The Solicitors Regulation Authority (SRA) expects its compensation fund to have to pay out up to £2.5m in the next practising year to cover the cost of negligence claims against uninsured law firms, it has emerged.

The regulator said that, following the closure of the assigned risks pool (ARP) in September 2013, claims against uninsured firms would potentially fall on the fund. These would include claims on firms ineligible to join the ARP in its final year of operation.

The SRA said that £500,000 had been incorporated into the compensation fund contributions for the past two years to cover the expected impact from uninsured firms, but only one grant of £750 had actually been paid out.

However, in its application to the Legal Services Board (LSB) for approval of changes in contributions to the fund for the 2014/15 practising year, the SRA said the “number and value” of claims against uninsured firms was increasing.

In its decision notice approving the changes, which cut the individual contribution to the fund from £56 to £32 and the firm contribution from £836 to £548, the LSB said the regulator had explained that it was expecting an increase in claims.

“Having considered the number of open cases, and the original and revised amounts claimed for these cases, the LSB is satisfied that the SRA has assured itself that the level is appropriate.”

As part of its calculations, the SRA said it expected that intervention costs to fall from £12.3m in the current practising year to £7.93m next year. The cost for 2014/15 includes £3.04m in legal fees to external agents of the SRA, down from £5.9m this year and £4.52m in archiving costs, down from £6m last year.

The SRA expected archiving costs to fall this year “as we start destroying files”, but that would depend partly on applications to the court.

The regulator said it assumed that there would be 52 interventions in this and subsequent practising years. It added that interventions in the practising year to the end of May 2014 were “more usual in scale and type” than the previous year, it may be “only a matter of time” before another large intervention took place, with its “associated costs and possible claims”.

 

Tags:




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Reports

Our latest special report, produced in association with Temple Legal Protection, looks at the role of after-the-event (ATE) insurance in commercial litigation post-LASPO. We are at a time when insurers, solicitors, clients and litigation funders work ever more closely to create funding packages that work for all of them, with conditional fee and even damages-based agreements now part of many law firms’ armoury.

Blog

16 September 2019

The Amazon effect

I have to be honest and say it still amazes me how many lawyers we come into contact with, who are still behaving like dinosaurs when it comes to technology. It’s not about chronological age.

Read More

Loading animation