UK solicitors finalise plans for indemnity insurance fund

British solicitors have confirmed plans to launch an insurance fund to cover historical negligence claims.

The Solicitors Regulation Authority (SRA) said its plan to bring an insurance fund for historical negligence claims under its control had received final approval from the regulator’s board.

The move will bring the Solicitors Indemnity Fund (SIF) under the SRA’s control to ensure future consumer protection for post six-year negligence claims. The rules will now be submitted to the Legal Services Board (LSB) for approval, ahead of the new arrangements becoming effective from October.

The scheme will protect consumers who suffer loss from the negligence of a solicitor but cannot claim under the law firm’s indemnity insurance because the firm has been closed for more than six years and has no successor practice.

All regulated law firms are required to have indemnity insurance which covers them for any claims made in the six years after they close.

The move to launch a dedicated insurance fund comes after the regulator decided in September that an SRA-run indemnity scheme offered the most cost-effective and proportionate solution to providing appropriate consumer protection for post six-year claims.

Such losses are currently covered by the Solicitors Indemnity Fund, which is due to close to new claims in September 2023.

The SRA consulted on draft new rules for the scheme late last year. Feedback strongly supported the principle of providing ongoing consumer protection for post six-year negligence, although respondents had a range of views on the detail of the scheme.

Based on this feedback the SRA made some changes to its original proposals, including updates to the process for when an arbitrator is required so it is appointed by an appropriate independent body.

SRA CEO Paul Philip said: “Across all the consultations we have run on post six-year cover there has been a consistent theme that both the public and profession value the protections the SIF provides.

“The SRA-run scheme will provide assurance for all that there is ongoing protection for clients. By running the scheme we can make sure it runs as efficiently and effectively as possible.”

He added: “The feedback we received was useful and we have made some changes in response. Others also questioned whether we had the expertise to run an indemnity scheme, so it's worth clarifying that we will be engaging external experts to help us further develop and then deliver the day-to-day operation of the scheme.”