Master of the Rolls, Lord Woolf, has told the Solicitors Indemnity Fund (SIF) to insure firms against claims arising from the Millennium Bug – a move which could lead to a huge hike in SIF contributions.
At a meeting last week with SIF chairman Peter Williamson and managing director Liz Mullins, he said it was in the public interest to cover claims arising from millennium compliance problems.
SIF had been hoping to follow the example of commercial insurers, who have refused to cover millennium claims, except in limited circumstances.
Williamson broke the news to the Law Society council on Thursday. The council then voted to draw up a rule requiring practitioners to minimise the risk of millennium claims.
Neither the Law Society nor SIF were able to estimate the effect of Lord Woolf's intervention on SIF contributions, but law firms are not generally renowned for their IT skills and there could be a flood of claims.
Solicitors are at risk from claims arising either from advice to clients where the business concerned is not millennium compliant or from failure of their own systems.
The Law Society was unable to say when it could give an indication of the effect of Lord Woolf's decision on SIF contributions – which rose by 50 per cent last year due to the massive £450m shortfall in the fund.
A SIF spokeswoman said: “We will shortly be commissioning experts to research the level of exposure of firms to claims and we are considering appointing solicitors who have already been working with the insurance industry on the millennium problem, and possibly IT experts as well.”
The council also voted to introduce risk banding from 1 September – which means SIF fees will vary according to the area of law practised.
The move was resisted by the Solicitors Property Group, which claimed the changes would expose some conveyancing firms to premium hikes of up to 470 per cent.