Why your smaller solicitor clients need professional indemnity insurance
Solicitors’ professional indemnity insurance (PI) is cover your clients hope they will never have to use. But there are good reasons why the profession’s regulatory bodies require practising law firms to have it. By protecting against civil liability claims, PI enhances a firm’s financial security and protects its clients.
Allegations of professional negligence are common—and regardless of how well-founded they may be, they can be difficult to defend. This is especially true when they relate to events far back in the past. Key staff who were involved may have left or simply forgotten crucial details.
By ensuring your smaller solicitor clients have the right PI cover, you’re mitigating the damaging consequences they could face if they were held liable for financial losses as a result of advice they have given to clients. In the process, you’re giving them peace of mind. When they know they are protected from exposures arising from the professional advice they provide, they can focus on running their firm—not on potential claims of professional negligence.
“By providing the full story, your clients can give insurers a favourable impression of how well they run their business.” James Graham
How much cover does a small firm need?
You can be a valued partner to your small solicitor clients by ensuring they have sufficient PI cover. While the Solicitors Regulatory Authority (SRA) requires a minimum level of cover to be in place as a condition of membership, it also requires firms to assess themselves and purchase a level of PI commensurate with their own risk exposure.
For example, even if your solicitor client runs a small to medium-sized firm, it may have large corporate clients instructing it on bigger, more complex transactions. The liability for any losses will increase as a result.
To determine the appropriate amount of cover, your clients will need to focus on what kind of work they’re doing, who they’re doing it for, and how much it could cost if they were held liable for their loss. You can help them correctly gauge their potential exposure by ensuring their insurance protection aligns with the size of their clients and the contract values involved.
As part of this discussion, you can guide them on such topics as indemnity limits in client retainers. Some clients will appoint only firms that carry limits of £10 million or more, in which case, they should either:
- Place their insurance with an insurer that can offer limits above the minimum amounts required by the SRA; or
- Purchase ‘top up’ cover (also known as excess layer capacity) to reach their desired amount.
How to help your clients secure PI
Preparation is vital. Start the process as early as possible so your clients have enough time to compile their renewal information.
The proposal form is an essential part of the renewal process. Advise your clients to be clear and concise and provide plenty of supporting information. The latter can improve the underwriter’s understanding and provide the context they need to accurately assess the business.
One of the most important rating factors is a firm’s claims history. Insurers appreciate that claims happen, but when they do, they like to see evidence that the firm has learned lessons and implemented procedural changes to prevent a recurrence. By providing the full story, your clients can give insurers a favourable impression of how well they run their business. This should help them achieve the cover they want at an acceptable premium.
James Graham is the Deputy Head of Professional Indemnity and Cyber at Travelers Europe. He can be contacted at: jmgraham@travelers.com
