The Law Society’s call for the Solicitors Regulation Authority to extend a scheme that provides solicitors’ professional indemnity insurance (PII) post -six year run-off cover has been heeded.
The SRA Board approved proposals made by the Society to introduce rules to extend the scheme, which was established by the Society back in 2000.
However, the Society’s call for a cap on the cost to the profession of the extension was ignored.
The SRA has decided to extend the scheme, which is managed by the Solicitors Indemnity Fund (SIF) and funded collectively by the entire profession, for another three years until 2020 after the Law Society warned that an extension was necessary to give security to recently retired and retiring solicitors.
However, the Society’s proposal to cap the profession’s total liability at £10 million and introduce individual limits was not adopted.
Law Society chief executive Desmond Hudson said: “Extending the run-off cover is a welcome step by the SRA and one which reflects what the Law Society had been calling for. If approved by the LSB, the extension will give retiring solicitors peace of mind and give firms considering leaving private practice and solicitors contemplating retirement greater certainty over the future, and provides valuable protection for retired solicitors, the wider profession and the public.
“The Society argued that this cover should be limited by a cap. There is a risk to the profession in a form of a possible future levy if there are insufficient reserves to meet claims which under this plan are unlimited.
“The Law Society sought to ensure that the profession was not unduly exposed and suggested a cap that would limit cover only in the event of abnormally high level of claims within the three year period. This concern was not addressed by the Board, which raises questions about the decision-making process.”
Also part of the rule changes which are to be submitted for consideration by the LSB is a reversal of the SRA’s plans that would have extended the scope of insurance cover to non-authorised SRA firms.
Desmond Hudson said: “This is an improvement and is consistent with the intention expressed in the SRA’s 2011 Policy Statement, however, it still does not address our overarching concerns about the adequacy of the SRA’s consultation process since whether this is an appropriate role to be placed on the Compensation Fund is of fundamental importance. Given the importance of this matter we have raised our concerns formally with the LSB.”
The Society will be undertaking further work to consider the impact on Group reserves and the risk to the profession if the provision of this cover and how it is to be funded is to be managed in the same way beyond 2020.
