Controversial cuts to the Solicitors Regulation Authority (SRA) Compensation Fund have been maintained by the regulator. It wants to limit pay-outs from the fund to £500,000 – down from the current £2 million limit. The SRA’s plans will now go to the Legal Services Board for final approval.
The plans, which have been subject to two public consultations have proved highly unpopular with legal bodies. Both the Law Society and Legal Services Consumer Panel came out strongly against the proposals earlier in the year (see Brunel News July 2020).
The regulator says the cuts are necessary to ensure that the fund can continue to protect the public, whilst remaining affordable for the profession. It says that just 0.2% of pay-outs over the last 15 years have been for more than £500,000.
At the same time the SRA is planning to exclude large trusts and charities from accessing the compensation fund and it will no longer cover unpaid fees of barristers and other professional experts. The regulator also says that payments may not be made where professional indemnity insurance is available.
Paul Philip, SRA Chief Executive, said: “The Compensation Fund provides an important layer of protection for those who need it, helping to maintain trust in the profession when things go wrong and there is no other means of claiming for loss. However, funding the scheme comes at a cost, which is borne by the wider profession and ultimately their clients. The tension between these two issues was a major theme of the feedback we received during both consultations.”
James Burgoyne, Director – Claims & Technical, Brunel Professions says that most risks to clients of dishonest solicitors are covered by professional indemnity insurance. “The Compensation Fund is intended to support those cases where insurance will not respond,” he said. Mr Burgoyne adds that relaxing the breadth of the SRA Minimum Terms & Conditions of insurance and drawing them in line with professional indemnity coverage for other professions such as the ICAEW Minimum Policy wording would encourage more insurers into the market, potentially reducing the high cost of insurance to law firms, and reducing the number of insurer insolvencies in this sector.
Brunel Professions is a leading provider of professional indemnity insurance broking to the legal profession. To find out more call Mark Sommariva on 0203 475 3275.