The Solicitors Indemnity Fund (SIF) – which was first due to close in 2017 – has been given another stay of execution and will now go on to September 2023, a year later than the Solicitors Regulation Authority (SRA) had planned.
The regulator said it would seek approval from the Legal Services Board for yet another extension to enable “detailed consideration” of the responses to its consultation on post six-year run-off cover (PSYROC) and come up with a final decision on the fund’s future.
The SIF protects solicitors against claims made after the six-year run-off period following closure of a law firm. Its closure had already been delayed three times after warnings that firm owners faced an uphill struggle to find alternative cover.
The SRA received 333 formal responses to the consultation – an exceptionally high number by its standards –and recorded direct engagement with around 3,200 people.
It said the majority did not support its preferred option of ending the requirement for PSYROC, while such was the strength of opposition to the idea of moving to an open-market solution that it has been dropped as a possible alternative.
Consultees stressed the significant potential impact on individual consumers if no protections were in place, despite the “relatively small” number of post six-year claims.
Some respondents, particularly from the insurance sector, also disagreed with the SRA’s analysis that the future number of claims would remain low.
“They noted recent high levels of claims for conveyancing and wills, trust and probate. Other respondents added that the increasing costs of property and increasing level of property purchases could lead to increased numbers of claims, and claims of higher value.”
Respondents also considered the cost to solicitors of continuing with PSYROC through an indemnity fund to be modest.
“Representative bodies and many of the individual solicitors who responded asserted forcefully that solicitors and firms would be willing to pay a moderate levy to cover the cost of ongoing PSYROC, and that this would not result in a material increase in costs to consumers.”
It was also argued that it would be unfair to end protection for long-tail claims retrospectively, “since clients would have assumed the existence of guaranteed indefinite protection against losses caused by negligence at the time when they bought the legal service”.
The SRA said it recognised “the strength of feedback” but still had “serious concerns that the current costs of running the SIF are higher than they should be for the benefit delivered”.
Chair Anna Bradley said: “We want to work closely with stakeholders, including particularly the Law Society, to build on the constructive ideas we heard from the consultation, and explore credible, value-for-money options that could provide efficient and effective consumer protection.
“We can then make a decision on the long-term position.”
The Law Society has lobbied strongly against closing the SIF. President I Stephanie Boyce said she was “delighted” that the SRA “given the fund another chance”.
She explained: “Possible alternatives to SIF include making changes to how the fund is set up and operated, reducing the scope of protection it gives, or finding a different consumer protection vehicle funded via SIF’s surplus – which may also be subsidised by the profession.”