England and Wales legal regulator proposes to close solicitors indemnity fund

Thursday, 25 November 2021
The Solicitors Regulation Authority (SRA) for England and Wales is proposing to close the solicitors indemnity fund (SIF) and end its post-six-year run-off cover.
Regulation

The SIF was the standard system of compulsory professional indemnity cover for solicitors before the profession switched to the open market insurance model in 2000. It also provides run-off cover to firms and retired solicitors after the expiry of the six-year run-off period that is automatically provided by all professional indemnity policies if a firm closes down without a successor practice. Professional negligence claims made against solicitors have a six-year time bar and so the SIF system protects against almost all run-off claims, of which about 90 per cent are made within that six-year period. The average successful claim is about GBP34,000.

The fund still contains GBP22 million, but the number of claims against it is falling. The SRA predicts the number will fall from about 45 in 2023 to 31 in 2029 and says the cost of maintaining the post-six-year scheme is 'unlikely to be proportionate in light of the level of consumer protection it provides.’

However, the Law Society of England and Wales objects. It notes that some consumers may suffer and says the SRA has not shown that the scheme's removal will have any material impact on the cost of legal services or lead to any improvement in the market for legal services. 'It would be in the best interests of consumers and the profession alike to retain the insurance protection that SIF provides', said the society.

The SRA's consultation ends on 15 February 2022.

Separately, the SRA is also asking for new powers to impose financial penalties on erring solicitors. At the moment, the maximum fine it can impose on traditional law firms or individual solicitors is GBP2,000, although alternative business structures can be given unlimited fines. The SRA wants to increase the maximum fine for law firms and solicitors to GBP25,000, although the amount would depend in part on the firm's or individual's size. For more serious cases, it wants to be able to fine firms up 5 per cent of their annual turnover. This would mean a broader range of disciplinary matters could be dealt with by the SRA directly, leaving the most serious cases to be handled by the Solicitors Disciplinary Tribunal with its powers of suspension and striking-off.

The SRA also wants to introduce a 'fast-track' schedule of fixed penalties up to GBP1,500, to enable lower-level misconduct to be dealt with more easily, and provide greater transparency and consistency in how penalties were applied.

Feedback on the penalties proposals can be submitted until 11 February 2022. 'We would welcome views from across the profession, other regulators and more widely', said SRA Chair Anna Bradley.

Sources

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