The SRA has proposed to end the provision of post-six-year run-off cover because they judge the protection as disproportionately expensive. Run-off cover is insurance for claims made against a law firm after it has stopped doing business. This change would mean that the Solicitors Indemnity Fund would effectively close. Indemnity insurance protects solicitors against claims of possible negligence or failure to perform. However, if the Solicitors Indemnity Fund were to close the remaining funds would be handed to the Law Society.

If this were to happen and run-off insurance was to end, the profession would be left with two choices. The first would be to ask solicitors to pay for cover to reduce the expense. The second would be to leave retired practitioners to deal with any and all claims themselves.

Based upon the last ten tears, the SRA’s forecasts show that an average of 31 clients are likely to gain from the Solicitors Indemnity Fund each year. This results in an average of £34,600 being paid out which includes defense costs. Up to £2.4m a year will be required from the profession to continue the ongoing funding to the Solicitors Indemnity Fund each year. This expense would most likely be passed onto clients.

The SRA feels that they cannot keep extending the Solicitors Indemnity Fund as they have done in recent years. There will be a 12-week consultation where a discussion will be had about what will happen with the remaining reserves of the Solicitors Indemnity Fund if the six-year run-off cover is no longer provided. Transferring the remaining funds to the Law Society would at least enable them to use the funds to benefit the profession.

 

How can we help?

At Hawsons we have a dedicated team of solicitor accountants at our offices in Sheffield, Doncaster, and Northampton.

We act for a large number of law firms across all three of our offices and offer a wide range of services which are tailored to meet their individual needs. Our legal client base consists of a multitude of firms of varying structure and size, from sole traders to limited companies and LLPs with corporate members.

Our understanding of the unique issues that many in the sector are facing, combined with our technical experience, allows our solicitor specialists to provide you with proactive, commercial and informed accountancy and tax advice.

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141

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