Retired Lawyers Fear Bankruptcy When Insurance Safety Net Closes | New
Retired lawyers say they live in fear of historic negligence claims coming their way as the safety net to protect them draws to an end.
The Lawyers Compensation Fund is expected to close from September – a move delayed a year ago – as the safety net for claims against a business dating after the six-year liquidation date is eliminated.
After a law firm closes, liquidation coverage should be purchased to protect lawyers and their clients if a claim arises due to negligence. The SIF has been dubbed a “ quiet sleep ” clause because it protects retired lawyers – or potentially their estates – from historic claims.
There are still concerns that no viable product has been made available to businesses and lawyers to purchase additional coverage. The Solicitors Regulation Authority, which has taken over the administration of the Law Society fund, has no plans to do anything after September as it is no longer a regulatory issue.
“ As it stands now, after the closure of SIF, if a company has gone out of business without a successor practice and its liquidation coverage has expired and the former executives have not made other arrangements , then any new claims will not be insured, ” President of the Bar of England and Wales, I. Stephanie Boyce, said.
Make no mistake, there is a significant risk of claims occurring more than six years after companies cease operations, with data suggesting more than 10% of claims are made outside the mandatory expiration period. of the SRA.
“ If you have practiced in areas such as transfer of property, wills and trusts, children’s personal injury settlement or marital property, claims can arise decades after the end of work. ”
The Bar advises firms that have closed without a replacement firm after August 31, 2000 to consider their exposure and – if justified – to explore the possibility of alternative coverage. Replacement coverage should not be subject to SRA minimum requirements
Boyce added: “Given the unfavorable conditions currently prevailing in the insurance market, it is unfortunate that many companies are struggling to find a suitable solution.
“ Factors such as a poor claim history, having worked in areas with a higher risk of late claims, and most importantly not having paid your liquidation premium, are all likely to prevent a realistic prospect from finding coverage. additional liquidation in the field. market.
“The Bar is aware of these difficulties and is doing everything possible to find a viable alternative. However, the issues are serious, complicated and difficult to overcome, especially since – as a representative body of the legal profession – we have no power over compensation.
“Members and former members should be prepared for the possibility that no comprehensive solution can be found.”
Several retired lawyers have contacted the Gazette, concerned about their potential exposure to historic claims. A former practitioner said, “ The consequence of this is that I may or may not be uninsured, which means that anyone who might have a claim against my old business could be left without a remedy. ”
While most claims against businesses are covered by the six years of liquidation, around 11% of claims are filed after the mandatory period, potentially leaving owners personally liable. The most common types of legal work exposed to historical claims are property transfer, wills and trusts, and child injury.
In the 20 years since solicitors in England and Wales voted to move from a mutual professional liability (PII) insurance scheme to a market-based model, the Solicitors Indemnity Fund (SIF) has provided additional liquidation coverage for businesses that have closed, providing continued protection for clients, partners and staff once their mandatory six-year liquidation period is over.
Frank Maher, a partner at Northwestern firm Legal Risk, said retired lawyers were right to be concerned as SIF continued to receive complaints for companies whose six-year deadline has expired. He added: ‘I think some are substantial and many involve trusts and estates where claims can arise years later. The same is true for personal injury claims in which children or other people with disabilities are involved. It should be borne in mind that you may have large claims for low value work – I’ve seen a multi-million pound claim arising from a personal injury case that was settled for £ 2,000, and a £ 3million claim from a transfer of ownership of £ 25,000. transaction.’