Professional Indemnity Insurance

Solicitors’ professional indemnity insurance covers civil liability claims arising from work in private legal practice. Most claims brought against solicitors working in private practice relate to professional negligence attributed to mistakes and errors and omissions. These policies can include damages, compensation and legal defence costs, which can be quite substantial. Depending on your type of firm, typically required minimum cover is £2 million or £3 million. Exclusions may apply and will depend on which country you practice in and what is allowed under the minimum terms and conditions (in England and Wales) or Master Policies (in Scotland and Northern Ireland). Make sure you know exactly what your policy does and does not cover.

Excess layer or top-up cover is insurance cover for claims that rise above the primary level of coverage (typically the minimum requirements). All solicitors and firms should conduct an individual assessment to see whether their minimum required levels of cover are sufficient and how much excess layer or top-up cover is needed. This assessment should be based on the firm’s size, structure claims history and exposure to risks. If you have a single claim (or aggregate claims from related acts or omissions) that exceed the indemnity amount covered in your policy, then you will be liable for the remainder if you do not have an access layer or top-up cover. Best practices dictate that firms should conduct a risk assessment before accepting new clients or new work to check that the new risks will not exceed the current indemnity limit.

The following is a list of just a few risks solicitors can face:

• Risks from providing professional legal services, such as giving advice to clients and assisting with legal matters, performing services and giving investment advice.
• Cyber liability risks from new technologies, such as digital document storage, electronic filing of documents and mobile technology.
• Unfamiliar areas of law – it may be necessary to start practicing in new areas in today’s economy, but it produces risk.
• Risks from pro bono work, including working with law centres, charities, and other non-commercial advice services.

Premiums are calculated based on a number of factors:

• Claims history
• Types and categories of work you undertake
• Firm revenue
• Number of solicitors and employees
• Excess amounts

Along with holding the proper professional indemnity cover, solicitors can also take proactive actions to help limit liability by implementing risk management strategies. This includes:

• Documenting the processes used to carry out professional responsibilities.
• Committing to loss prevention and using risk management services.
• Adopting and implementing negligence prevention measures such as office management policies.
• Using well-defined fee agreements with your clients including written documents.
• Using an electronic conflict of interest search system.
• Practising in the area of law in which you have experience, and appropriately supervising junior solicitors and support staff.