SMDF in trouble

dazza21ie

http://www.irishtimes.com/newspaper/ireland/2011/0408/1224294222982.html

http://blackhall.newsweaver.ie/2d1j3qg6htv-1r6nx7oag4?email=true

I know the above two links will not suprise some people as the rumours about the SMDF have been rampant.

I am sure the articles are of concern to most people within the profession especially those solicitors who have placed their insurance this year with the SMDF.

However, should the SMDF be saved by the Law Society again? (a guarantee was provided to them before for €8 million in relation to a bond investment which went sour).

I think this is an issue which may divide the solicitors profession. Quite alot of people will be reluctant to finance other firms policies and the SMDF. A market without the SMDF involved would be even more restrictive than the last two years.

Lets hope the Law Society make the right choice!

RJunior

Law Society is having a special Council Meeting on it. Today I think? I'm pretty sure they'll roll on in with another guarantee.

Kosseegan

There will be no guarantee. The SMDF will be wound up. The shortfall will be covered by the Society. The Law Society is going to exercise its powers and arrange block insurance to cover all solicitors. Membership will be compulsory.There will be no choice of insurer. No more shopping around.

Delancey

Kosseegan wrote: »

There will be no guarantee. The SMDF will be wound up. The shortfall will be covered by the Society. The Law Society is going to exercise its powers and arrange block insurance to cover all solicitors. Membership will be compulsory.There will be no choice of insurer. No more shopping around.

Will this mean lower or higher premiums ?

dazza21ie

The SMDF want the Law Society (its members) to fund it for the next 10 or so years to it can slowly wind down. It will not be writing any new business. The Law Society are consulting with members for a change.

Its hard to see any benefit in funding a company that won't be providing insurance to the profession. The Law Society expects to be circulating material next week to allow members make an informed decision.

This saga might at least concentrate the Law Society on the problem at hand because it is not that long again until renewal time.

Grolschevik

dazza21ie wrote: »

The SMDF want the Law Society (its members) to fund it for the next 10 or so years to it can slowly wind down. It will not be writing any new business. The Law Society are consulting with members for a change.

Yep...

From: http://www.irishtimes.com/newspaper/ireland/2011/0419/1224294978713.html

Solicitors' insurance body seeks funds for wind-down

CAROL COULTER, Legal Affairs Editor

THE SOLICITORS’ professional insurance body, the Solicitors Mutual Defence Fund, is to cease writing new business and is seeking financial support from the Law Society to allow its orderly wind-down over 10 to 15 years.

A special general meeting of members of the Law Society has been called for May 4th to consider the fund’s request for financial support of between €14 million and €16 million.

Chairman of the fund Laurence Shields wrote to solicitors insured with the fund last Friday, explaining that it may not have sufficient reserves to pay all claims into the long-term future. The letter, which has been seen by The Irish Times, explained that the options were to appoint a liquidator or commence an orderly wind-down by working through the claims over a number of years while not taking on any new risk.

The latter option, which is the one favoured by the fund and the Council of the Law Society, would require a capital commitment estimated at between €14 million and €16 million payable over approximately 15 years.

The only possible source of this money is the Law Society, whose members set up the fund to provide professional indemnity insurance for solicitors more than 20 years ago. Several former presidents of the society sit on its board. The council of the society has, therefore, called a special general meeting of members to discuss this proposal.

A crucial consideration for the meeting on May 4th is that liquidation could expose anyone insured with the fund and facing a possible claim to payment of 10 per cent of any judgment against them and costs.

The fund has reinsured 90 per cent of its exposure over the past 10 years. According to Mr Shields’s letter, these contracts are secure but an orderly wind-down is essential to extract the maximum benefit from them.

Professional indemnity insurance is a requirement for all solicitors, who cannot renew their practising certificates without it. In addition to ensuring solicitors are not personally liable if found to be negligent, members of the public who successfully sue solicitors can be sure of being paid.

The fund was set up to compete with commercial insurance companies and traded successfully for a number of years. However, in 2008 and 2009 the global financial collapse, combined with a huge increase in claims against solicitors, primarily from financial institutions, put it under severe strain.

It continued to write insurance, but only after obtaining a loan guarantee from the Law Society for €8.4 million, which has not been drawn down, and now will not be, said Mr Shields.

The Council of the Law Society, which met twice last week, agreed that the decision to financially support the fund should be taken by the members of the society in a general meeting, rather than by the council. President of the Law Society John Costello wrote to all members of the society last week informing them of the special general meeting. According to the letter, the council has had extensive advice from independent experts on all the options available to the society and the consequences of each.

The proposal for all members of the society to subsidise the winding down of the fund over a period of at least 10 years is likely to be resisted, especially among the majority of members who are not insured with it. At its height the fund insured 60 per cent of all solicitors, but it is believed this figure has more than halved.

The Mayo Solicitors Bar Association called an emergency general meeting for last night to discuss the proposal prior to the May 4th meeting. This is likely to be followed by other county bar associations.

Delancey

It does seem unfair that Solicitors who are not insured by SMDF will have to pay towards the proposed solution , kinda like paying for insurance twice over ?

dazza21ie

Although the Law Society are leaving the final decision to their members their are recommending that the SMDF be supported.

I think the SMDF only cover around 40% of the profession at this stage. Anyway they will not be offering anyone insurance again this year therefore they only people to benefit from this support would be those who have claims against them over the last few years will insured by the SMDF. One would think that ths figure would be less than a majority of the profession.

The Law Society have a hard sell on their hands. It will be interesting how they propose to fund this. Probably a levy on practising certificates because I don't think they have the power to put a levy over future insurance policies.

The SMDF's withdrawal from the market will lead to higher premiums due to less competition. The last thing the profession needs is a further levy to be paying.

Fred Cohen

dazza21ie wrote: »

The SMDF want the Law Society (its members) to fund it for the next 10 or so years to it can slowly wind down. It will not be writing any new business. The Law Society are consulting with members for a change.

Its hard to see any benefit in funding a company that won't be providing insurance to the profession. The Law Society expects to be circulating material next week to allow members make an informed decision.

This saga might at least concentrate the Law Society on the problem at hand because it is not that long again until renewal time.

Good Call

Grolschevik

dazza21ie wrote: »

It will be interesting how they propose to fund this. Probably a levy on practising certificates

Couple of hundred each on the practising cert for the next ten or so years?

Had Enough

To have the Law Society support the SMDF again would affirm a commonly held belief that the SMDF is not independent of the Law Society which it is supposed to be.

I would question the judgment of those solicitors who chose to be insured with the SMDF this year and in 2010 in full knowledge that the SMDF had sought, and obtained, a bail-out from the Law Society in 2009 by seeking its guarantee for an €8.4 million loan from a financial institution to the SMDF. Surely this was a red flag to any prudent person.

nuac

Any levy should be confined to those who were insured with the SMDF.

Unreasonable to expect solicitors who were insured elsewhere to pay this levy.

bath handle

According to the latest phoenix the losses could be massive. At least some of the re~insurers may be able to avoid tpaying up.

BenEadir

Hi,

My understanding is the SMDF aren't covered by the Insurance Compensation Fund so if they are declared insolvent then all agreed but unpaid settlements will be 'caught' out in the same way unsecured creditors of any insolvent business are.

My friend is being sued by Party A as a result of negligence by my friends solicitor which isn't contested by the solicitor. The SMDF want to settle the case whereby my friend agrees to rectify the situation with Party A and the SMDF pay my friend €X in compensation.

My friend is concerned about conceding parrty A's claim and agreeing to undertake the necessary work in case the SMDF somehow drag their feet on paying him the agreed compensation or their cheque isn't honoured.

Can anyone here shed some light on the practicality surrounding processing of SMDF payments? If all three parties are at the table together to agree a settlement will the people reprepsenting the SMDF provide proof of funds and put the agreed amount in ESCROW (until my friend undertakes the agreed works) or put the funds into my friends solicitors client account at the moment the settlement agreement is signed?

Would really appreciate some insight into this!!

Ben

BenEadir

Bump!! Anyone????

BenEadir

The deafening silence says it all me thinks :eek::eek::eek:

Bank draft on the table or confirmed funds in my friends solicitors bank account before he signs any settlement with the SMDF!!!!

Cheers all

Ben