PRESIDENT’S LETTER
Closure of SIF is of great concern to former principals who took out appropriate PII cover prior to retiring or sold their practice within six years but are now under the threat of being personally liable for losses from any claims that are made. It is unlikely that any further extensions will be made by the SRA. The Law Society of England and Wales has helpfully identified four groups that need to prepare for the closure of SIF: Group A: firms that closed on or before 31 August 2000. This group is currently covered by SIF and will continue to receive funds because they closed their firm before the profession moved to purchasing insurance on the open market. Group B: firms that closed between 1 September 2000 and 30 September 2016
CLOSURE OF THE SOLICITORS INDEMNITY FUND The profession is facing a significant challenge in the closure of the Solicitors Indemnity Fund (SIF). Historically, the Statutory Indemnity (SIF) has provided indemnity cover to solicitors of England and Wales. The profession voted to move from a statutory fund system to purchasing professional indemnity insurance (PII) on the open market and a portion of SIF was retained to provide ongoing run-off cover for firms that had already closed. However, its scope was later extended to cover other closed firms once their mandatory six-year run-off had expired. In 2020, The Solicitors Regulation Authority (SRA) reported that they would stop accepting new claims in 2021. However, they have since agreed to extend the scheme for a further 12 months after they were reassured that the extension was affordable. The Law Society of England and Wales has lobbied on behalf of solicitors and clients urging the SRA and insurance industry to open a consultation to identify potential options. The real question is how will closure of SIF will affect law firms? Well once a law firm closes, run-off cover must be purchased to protect both solicitors and their clients from a civil claim that may arise out of negligence. This run-off cover is usually purchased as part of 4 www.birminghamlawsociety.co.uk
This group is currently in SIF or will be in SIF by 30 September 2022. However, they face the greatest difficulty due to SIF’s closure:
the firm’s professional indemnity insurance (PII) for a duration of six year.
• Former principals of a closed firm should notify SIF of any matter that could give rise to a claim by midnight on 30 September 2022 as SIF will provide indemnity, irrespective of whether proceedings are commenced after this date.
Cover outside of the six-year period is called supplementary run-off cover that has been provided by SIF by way of indemnity. This supplementary cover was provided at no additional cost to the former principals of a closed firm.
• Retain the relevant paperwork relating to your practice and indemnity insurance records together with previous applications and claims.
However, closure of SIF, means that cover will end on 30 September 2022 for firms that closed on or after 1 September 2000. Unless alternative arrangements are made the following could be personally liable for losses from any claims arising out of negligence: • former principals of firms that closed from September 2000 onwards • their estates and • individual employees
• Depending on whether you had a good claims history you should consider approaching your former broker or underwriter to check whether they are willing to provide you with supplementary run-off cover. • Check with your former partners whether they will indemnify you and/or how you would pay for any supplementary cover.
Of greater concern is that historically approximately 11% of claims are made after the mandatory run-off period has expired i.e. these late claims occur between six to fifteen years after a firm has closed.
• Former employers should contact former principals of firms that you worked at which closed without a successor practice during this period and ensure that they are aware of the closure of SIF.
Typically, the following types of legal work are at substantially greater risk of being made after the six-year runoff period:
• Discuss how they might indemnify you in the event of a claim against you as their employee.
• • • •
matrimonial wills and trusts child personal injury conveyancing
Group C: firms that have closed since 1 October 2016. This group applies to firms that have closed and will never enter SIF as
