Lawyers have been told to “prepare” for insurance claims as the Solicitors Indemnity Fund (SIF) comes to an end this September.
The Law Society for England and Wales said the closure of the scheme could leave owners of law firms that dissolved in the past 20 years personally liable for any losses related to claims against their practice.
The SIF has provided supplementary run-off cover for firms that have closed in the past two decades, providing clients with a means to redress even if a firm’s mandatory six year run-off period has come to an end.
According to the latest statistics, one in 10 claims made against a practice are made outside the mandatory run-off period.
But with the scheme set to close on 30 September 2021, law firms that have closed in the last 20 years will effectively become uninsured and liable for any new claims.
Warning solicitors to make alternative arrangements, Law Society president I. Stephanie Boyce said the risk is “significant”.
“As things currently stand, after the closure of SIF, if a firm ceased trading without a successor practice and its run-off cover has expired, and the former principals haven’t made alternative arrangements, then any new claims will be uninsured,” she said.
“Our current advice is that firms that closed without successor practices after 31 August 2000 should consider their exposure and – if warranted – investigate the possibility of alternative cover.”
She added: “If you have retired, or intend to retire, or if you were employed by a firm that has closed without a successor practice, then there is a possibility that you could find yourself personally liable for claims arising once the firm’s run-off cover has lapsed, and should prepare accordingly.”
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