There is no legal requirement for solicitors to hold professional indemnity insurance, however it is a regulatory requirement for the vast majority of practicing firms. This requirement is set by the SRA—the Solicitors Regulation Authority, which is responsible for ensuring that standards and codes of practice are met across the industry.
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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 indemnity insurance does the SRA require authorised solicitors to have?
The SRA sets out minimum terms which have remained unchanged since 2005:
- Full Civil Liability cover at levels of £2,000,000 per claim or £3,000,000 per claim for LLPs
- Unlimited defence costs payable in addition to claims costs
- A high standard of cover with few exclusions permitted and broad, favourable terms for insured businesses.
Full minimum terms and conditions for SRA authorised firms is available here.
These terms differ from those required of freelance solicitors, who must only obtain ‘adequate and appropriate’ insurance as described here. 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.
Does a consultant solicitor need their own legal professional indemnity insurance?
If you operate under the umbrella of a larger consultancy firm you will only need to be covered under their insurance policy. As a sole practitioner/freelancer you would need to obtain your own professional indemnity insurance.
Do in-house solicitors need professional indemnity insurance?
In-house solicitors do not need PII in their own name, however, their employer has a responsibility to ensure that in-house solicitors are covered on the overall PI insurance policy for the business. This does not need to be an SRA compliant policy unless the company itself is subject to SRA regulation.
What does solicitors professional indemnity insurance cover?
Aside from alleged professional negligence, solicitors professional indemnity will also cover any civil liability claims, regulatory authority awards and legal defence costs. The coverage is broad by design and through collaboration with insurers by the SRA in order to provide a useful and comprehensive protective measure.
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’s possible to advise without PI insurance in place, it is not recommended.