Member Article

What indemnity insurance are solicitors required to have by law?

In the UK, there are not any legal requirements for solicitors to have professional indemnity insurance (PII). However, most practicing law firms will need PII to comply with regulatory requirements as set by the Solicitors Regulation Authority (SRA). The SRA is the regulatory body that ensures minimum standards and codes of practice are met.

Why do solicitors need professional indemnity insurance?

Like any professional, solicitors provide everyday people and businesses with advice based on their area of expertise. Anyone advising from a position of expertise holds a duty of care towards their clientele, to ensure that the advice being given is correct and not negligent or likely to result in undue damage to their clients or others.

Solicitors must be especially wary given that their work often brings them into contentious or emotionally charged situations with the potential for significant gains or losses for their clients. As such, a professional indemnity policy that covers and protects against allegations of negligence whether justified or not serves as a welcome safety feature and one which may ultimately save a business from closure.

Finally, the majority of solicitors are likely to require certain levels of professional indemnity insurance as a condition of their SRA membership.

What are PII requirements for SRA-authorised solicitors?

LLPs and other authorised firms are required to adhere to both the minimum terms and conditions and to ensure their policy coverage is adequate and appropriate. To ensure that firms have sufficient coverage to protect themselves and their clients, the SRA sets out the following minimum terms for PI insurance requirements:

• Full Civil Liability cover of £2,000,000 per claim (£3,000,000 per claim for LLPs) • Unlimited defence costs • A high standard of cover with few exclusions and broad, favourable terms for the insured

Does a freelance solicitor need PI insurance?

Freelance solicitors must only obtain ‘adequate and appropriate’ insurance. The obligation to have adequate and appropriate insurance arises if a solicitor provides reserved legal services to the public. The SRA provides guidance to adequate and appropriate insurance on their website. A freelance solicitor must reassess their needs every year to ensure they are insured correctly.

Does a consultant solicitor need their own legal professional indemnity insurance?

If depends on whether the consultant solicitor works for a larger consultancy firm or works independently. Anyone operating under a larger consultancy firm will only need to be covered under their PI insurance policy. However, a sole practitioner or freelance consultant will need their own PI insurance coverage.

Do in house solicitors need professional indemnity insurance?

Not in their own name, however their employer has a responsibility to ensure that they are covered on the overall business insurance policy. This only needs to be an SRA compliant policy if the company itself is subject to SRA regulation.

What does solicitors professional indemnity insurance cover?

Alleged professional negligence is the primary cover offered by solicitors professional indemnity insurance. In addition, solicitors PI will also cover legal defence costs, civil liability claims and awards to regulatory authorities. Solicitor PII coverage is intentionally broad; policies have been designed via cooperation between the SRA and insurance providers to provide a range of protection to solicitors and clients alike.

Can a solicitor provide advice without indemnity insurance?

Yes, although even if exempt from SRA requirements anyone who provides professional services or advice can be claimed against in the event that their services have cost a third party, through negligence or breach of civil liability. So whilst it is possible for some solicitors to advise without PI insurance in place, it is not recommended.

Resources

• Solicitors professional indemnity insurance quotes and guide by NimbleFins: https://www.nimblefins.co.uk/business-insurance/solicitors-insurance

• Minimum terms and conditions for SRA authorised firms: https://www.sra.org.uk/globalassets/documents/rules/previous-indemnity/Indemnity-minimum-TCs-06.pdf

• SRA guide to adequate and appropriate insurance: https://www.sra.org.uk/solicitors/guidance/adequate-and-appropriate-indemnity-insurance/

This was posted in Bdaily's Members' News section by Erin Yurday .