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Solicitors living in fear of future claims- an end to the Solicitors Indemnity Fund.26th April 2021 Will Disputes
The Solicitors Indemnity fund is set to close with effect from 30 September 2021.
The closure of the fund, which has previously provided a safety set for many retired solicitors, will now leave many living in fear of historical claims, arising many years after they have left legal practice. In particular, in the context of wills, trusts and probate, it is often the case that claims do not arise until many years later, sometimes long after solicitors have ceased practice.
What is the Solicitor’s Indemnity Fund?
The Solicitors Indemnity Fund originally provided cover to solicitors (both current and former), in England and Wales. The profession then moved towards Professional Indemnity Insurance for current practicing solicitors, with part of the Solicitors Indemnity Fund being retained to provide ongoing run-off cover for firms that had already closed.
When a law firm closes, run-off cover must be purchased to protect solicitors and their clients, in the event of any civil claims that arise due to negligence. This mandatory run-off cover is purchased as a part of the firm’s professional indemnity insurance and lasts for six years.
After this six year period has expired, protection for retired solicitors is presently covered by the Solicitors Indemnity Fund. The end of the cover provided by the fund only applies to firms which have closed since 1st September 2000 with firms which closed prior to this, retaining protection.
Key concerns in relation to the closure of the fund
The fund has previously provided security to retiring solicitors, in the event of a claim against them, after the six year period has passed. According to the Law Society, it is believed that approximately 11% of claims are made after the mandatory six year run-off period has expired. The closure of the fund will now mean that retired solicitors run the risk of either themselves or their estate being personally liable for such claims, in the event that they do not have adequate alternative insurance provisions in place to protect them.
The issue which is apparent in arranging alternative cover is that it can be very difficult for insurers to want to provide such insurance to retiring solicitors. Therefore many will fail to find an adequate solution. Even if some do manage to obtain cover, there is the potential concern that the scope of cover could be more restricted than the provisions that are currently offered. Furthermore, any such insurance provisions will come at a cost to former lawyers, whereas the current Solicitors Indemnity Fund has provided free protection, whilst at the same time providing a comfort blanket to many.
Importance in the context of wills, trust and probate disputes
Problems with the drafting of wills in particular, due to their confidential nature until the death of the testator, are often not discovered until the death of the testator. Errors in the administration of trusts and estates, can also take a number of years to come to light. An example might be where a professional executor or trustee has sold an area of land for a set price but unsuccessfully attempted to reserve a benefit to the estate or trust in the event of an application for planning permission on the land, or where a person who was a minor at the time of an administration subsequently turns 18 and becomes capable of pursuing a claim. The closure of the Solicitors Indemnity Fund highlights the importance for professional trustees to take proper advice and seek directions from the court if they have any uncertainty about how to administer an estate or trust, because they are not necessarily going to be able to fall back on insurance to cover any liability to beneficiaries and may find themselves personally liable to them for their actions, in the event of a claim against them.
It is hoped that an adequate alternative to the Solicitors Indemnity Fund will be provided for in due course, but in the absence of such, any solicitors involved in drafting wills and trusts, or in the administration of trusts and estates, will need to take particular care in their role and seek appropriate advice or directions from the court where appropriate. Law firms which are closing will also have to explore alternative provisions to protect their owners and employees, and potentially pay hefty insurance premiums, to avoid the risk of personal financial liability against late claims.