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Closure of Solicitors’ Indemnity Fund

Indemnity_insurance_policy Print publication

26/02/2020

Solicitors’ firms must continue to have professional indemnity insurance, provided by a market insurer, for six years after they cease practising. This is known as ‘run-off cover’.  However, claims can come to light much later, sometimes even decades after a firm has closed.  This is where the Solicitors’ Indemnity Fund (known as the SIF) has traditionally stepped in to provide cover.

The SIF, run by Solicitors’ Indemnity Fund Limited (SIFL), has three distinct roles:

  1. It provides indemnity to solicitors’ firms in England and Wales against claims arising from professional negligence from 1 September 1987 until 31 August 2000
  2. It provides run-off cover to practices that ceased without a successor prior to 31 August 2000
  3. It provides expired run-off cover to firms that have ceased practising without a successor since 1 September 2000, but only after the primary run-off period of six years has elapsed.

However, the SIF is closing.  From 30 September 2020 the SIF will not accept any more cases concerning those firms which ceased practising after 1 September 2000.

SIFL will continue to manage any claims of which it has been notified prior to 30 September 2020. Potential claimants should therefore ensure that any claim against a firm of solicitors which ceased trading more than six years ago is filed with the SIF before that date.

The vast majority of claims against solicitors firms are dealt with without claimants ever needing to rely on the SIF. In our experience, claims against the SIF are rare and so the impact of the close of the SIF should be relatively minimal. However, it does mean that lenders will lose the safety net of knowing that the firm against which they may have a claim has insurance cover.  After 30 September 2020, a claim against one of these firms will involve pursuing the partners or sole practitioners directly (to the extent that they do not have limited liability). There is no significant risk, but over time lenders may find that claims against solicitors who ceased practising over six years ago are no longer commercially worth pursuing unless they are prepared to pursue the individual partners.

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