SIF protects clients, lawyers and their staff against claims made after the expiry of the compulsory six years’ run off cover. Unless new arrangements are put in place this post six-year run-off cover (PSYROC) will end on 30 September 2022 (save for extant claims and, following a change of position by SIF, those arising from notifications of circumstances made by then).
The Solicitors Regulation Authority (SRA) has published a consultation which closes on 15 February 2022. This includes a comprehensive 131 page report by Willis Towers Watson (WTW); those who are short of time might usefully read the Regulatory Impact Assessment (14 pages).
Every practising solicitor should look at the consultation: none should assume that the outcome won’t affect them, even if they practise in large firms. Change in the structures and ownership of law firms could increase the exposure of those practising in larger firms to the risks against which SIF presently provides protection.
The exercise of the SRA’s powers to continue the protection must comply with section 28 of the Legal Services Act 2007 (LSA 2007) and be proportionate. Continuing to provide cover will require funding; WTW estimate that this would cost £16 per solicitor annually, but that does not allow for investment income on a fund of, say, £20m.
The WTW report contains no case studies of claims, but, from the writer’s experience of defending claims, it is reasonable to assume that they will include people with serious medical conditions following undervalue settlement of claims, and other cases involving hardship. Left unprotected, these are the stuff of tabloid headlines.
The SRA’s position is that it is not its role to protect solicitors. However, SIF was established under section 37 of the Solicitors Act 1974, the provisions of which protect not only consumers, whose interests must of course be the first consideration, but also solicitors and their staff: Swain v The Law Society [1983] 1 AC 598 at p.618 B-C. Amendments to section 37 in the LSA 2007 did not affect this.
Further, the SRA has created an onerous liability regime for solicitors –
- restricting their ability to limit liability below the compulsory per claim insurance limit (£2/3m), when that limit may not be available to them anyway, for example because of aggregation (and SIF provides only £1m);
- through published guidance – ‘We would therefore not expect to see caps put on liability to clients as a matter of routine’ – compare the guidance from the RICS, which promotes the use of liability caps among firms, saying ‘[indemnity limits and liability caps] are not really related, and there is no legal or regulatory reason why a liability cap needs to be anywhere near as high as the insurance policy limit’;
- a change slipped into the 2019 Codes of Conduct which the SRA interpret as requiring solicitors to inform former clients of potential claims, even though the fiduciary relationship has ended.
The insurance market appears unwilling to provide cover, though we are aware of isolated exceptions. In any event, such cover will only be provided on an annual basis, and in the event of a claim may not be renewed.
The SRA suggests that The Law Society should arrange cover for its members, but post-LSA 2007 The Law Society, which derives its powers from Royal Charters, appears to have no power to implement an insurance scheme: such powers as it had were transferred to the SRA. Nor does The Law Society have power to compel payment of premiums or contributions to provide such cover; a voluntary scheme in our view would be unsustainable.
The consultation compares the run-off insurance provisions for other professions, which afford less protection, but these do not advance the debate: the limitation periods may be the same, but those in other branches of the legal profession and in other professions do not, in practice, have as great an exposure to long-tail claims as solicitors. Claims statistics in the WTW report cover reporting delays of up to 19 years, but there is no absolute maximum period in which claims can be made.
Solicitors are exposed, for example, by acting for children on personal injury claims and in trust cases, where time may not even start running for many years, and in conveyancing work, where a title defect may not be discovered until sale many years later.
Unlike other professions, we already have a mechanism in place providing protection for consumers, and for solicitors and their staff. If we didn’t, we might not create it, but we do, so let’s not allow it to wither on the vine when the current arrangements expire on 30 September 2022. If St Paul’s Cathedral did not exist, we probably would not build it today, but it does, and we take steps to preserve it.
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