Secret report calls for Sif carve-up

The troubled Solicitors Indemnity Fund (SIF) is to be scrapped in favour of six, separate, compulsory mutual funds covering specialist practice areas, under proposals to be unveiled by the Law Society next year.

The Appleby Committee, headed by Law Society Council member John Appleby, has spent a year examining how to revamp SIF and will recommend a multi-fund scheme when it releases its report on 22 January.

Under draft proposals leaked to The Lawyer, which have been seen by senior Law Society and SIF officials, solicitors will pay a percentage of their turnover into a specific fund covering their area of work, instead of one profession-wide pool.

A firm which undertakes a wide range of legal work will put a percentage of its turnover into each relevant fund. The aim is to separate off high-risk work like conveyancing from work regarded as lower risk, such as criminal.

The six funds will have their own management teams and will be overseen by a SIF-type organisation.

SIF in its present form will be scrapped as early as next summer if the recommendations win the support of the profession, although its staff are likely to stay on to run the new scheme.

Firms will still be responsible for paying off the existing £450m shortfall in SIF funds, and a backlog of claims could mean that 1997 claims under the current fund system will not be paid off until about 2005.

Firms that establish themselves after SIF's closure are unlikely to have to pay anything towards any of the existing shortfall.

It is understood that the decision to go with the six-funds option was made after extensive talks with independent insurance experts and hundreds of hours of deliberations.

But whether many of the larger commercial firms – which want to abolish the current mutual insurance scheme altogether in favour of private insurers – will approve remains in considerable doubt.

The scheme could be seen simply as an extension of the existing risk banding and no-claims bonuses already operated by SIF.

Holman Fenwick partnership chairman Jonathan Fine, whose practice was instrumental in setting up the anti-SIF November Group of 35 top firms, said the option of splitting SIF into mini-SIFs had never appealed to his group.

But the group would not dismiss Appleby's proposals out of hand, he added.

Wendy Gray, a London sole practitioner who in September refused to pay her SIF premium and instead took out private insurance, said it would be “ridiculous” if the management of the proposed new funds was not put in the hands of the private sector.

Law Society president Phillip Sycamore has promised extensive consultation with the profession on Appleby's report.

The Appleby Recommendations

SIF to be scrapped in favour of six separate compulsory mutual funds.

Each fund to cover a separate practice area.

Firms will pay into one or more funds depending on their area(s) of expertise.

Firms formed after the change will not be liable for the £450m shortfall.