SRA consultation on the future of PSYROC and the Solicitors Indemnity Fund – Law Society response
In November 2021, the SRA launched a major consultation on the future of post six-year run-off cover (PSYROC) and the Solicitors Indemnity Fund (SIF).
Although the policy is not yet decided, the SRA has strongly indicated that its preferred outcome would be to:
- close SIF to new claims, and
- bring to an end any regulatory requirement for the ongoing provision of PSYROC
We believe that PSYROC provides necessary protections for consumers of legal services and solicitors alike.
Maintaining SIF through a modest, compulsory levy on firms, would be the cheapest, most effective way to ensure that this cover remains available in the future.
At present, SIF settles around 31 claims per year, with an average value of £36,400.
What this means for clients
If the SRA closes SIF and ends PSYROC as a regulatory requirement, former clients (or their beneficiaries) with ‘long-tail claims’ – negligence and other claims arising more than six years after a firm closed without a successor practice – will be forced to seek compensation through the process of litigation in the courts unless other arrangements have been made.
The SRA observes in its consultation that, compared to SIF: “this would provide redress for some but [it] is a more costly and less accessible process with less certainty of result”.
We have serious concerns that, in the absence of PSYROC provided through SIF, clients with legitimate claims will be unable to find redress.
It will damage the reputation of the profession, undermine public confidence in the rule of law, and could have a devastating impact on individuals left uncompensated for their legitimate claims.
What this means for solicitors
If the SRA implements its preferred outcome, then solicitors could find themselves personally liable for long-tail claims.
The principals of such closed firms are at greatest risk, but employees could also be found liable in some circumstances.
It would be very difficult for solicitors to arrange alternative insurance on an individual basis, and any effective products that are made available are likely to be expensive.
Thousands of solicitors will be exposed to the risk of long-tail claims.
While the risk is low – just a few dozen successful claims a year – the impact for the individual solicitors found personally liable for claims of tens or maybe even hundreds of thousands of pounds, could be substantial.
The consultation closed on 15 February 2022.
The SRA will consider responses, and we expect it to announce its decision in the spring.
If the SRA decides that, having considered the matter further, it would be better to retain the SIF for the ongoing provision of PSYROC then we would offer our enthusiastic support.
However, if it presses ahead with the closure of SIF, we will be forced to consider other options.
We will remain active in the pursuit of a solution that will protect the interests of the profession, consumers, and the public at large.