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Professional indemnity insurance (PII) protects solicitors against allegations that their advice or services have been negligent, resulting in losses to their clients. But do solicitors ALWAYS need indemnity insurance? Or are there some conditions under which solicitor indemnity insurance is not required?
Tables of Contents
- Can a solicitor provide advice without indemnity insurance?
- Why do solicitors need professional indemnity insurance?
- Do solicitors need any other insurance policies?
Solicitor professional indemnity insurance is a policy that protects solicitors against allegations that their advice or services have been negligent, resulting in losses to their clients. It provides expert third-party advice, legal fee coverage and ultimately can cover any costs or fees awarded by courts following a claim.
Can a solicitor advise without professional indemnity insurance?
Whilst some solicitors can provide advice without indemnity insurance, for peace of mind and financial protection no solicitor should advise without indemnity insurance. The same can be said for solicitors run-off insurance.
A solicitor can provide legal advice without professional indemnity insurance as long as they are exempt from SRA Indemnity insurance rules and as long as they have no contractual obligation to hold indemnity insurance. However, as is the case with other professionals, solicitors can still be held accountable for client losses arising from their advice and services, something which indemnity insurance protects against.
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.
What firms are exempt from SRA Indemnity insurance Rules?
The SRA provides guidance on whether a business needs to be authorised or not in order to provide legal services. It is your responsibility to determine whether SRA guidelines apply to you or your business, however businesses that do not require SRA authorisation typically include:
- Anyone providing unreserved legal services
- Some charities and independent trade unions
- Businesses regulated by OISC or the FCA
- Businesses regulated by an approved regulator other than the SRA
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. However, a sole practitioner or freelance solicitor would need to obtain their own professional indemnity insurance policy.
Beware assurances that a clients’ policy covers ‘your work’ rather than ‘you’, as it’s often possible to cover the activities of subcontractors and consultants on policies in the event that a client is sued for the work, but insurers will then reserve the right to pass the claim on to the consultant or subcontractor responsible. Being named on a policy as an ‘additional insured’ will prevent this.
Do in-house solicitors need professional indemnity insurance?
In-house solicitors do not need PI insurance in their own name, but their employer has a responsibility to ensure that they are covered on the overall business insurance policy. This does not need to be an SRA compliant policy unless the company itself is subject to SRA regulation.
Do solicitors need any other insurance policies?
As solicitors usually interact with their clients or other members of the public in person, they should typically have Public Liability insurance; this protects against personal injury or damage claims made by third parties. If you employ anyone, Employers’ Liability is a legal requirement; this protects against claims that employees have become injured or ill as a result of their work.
Office insurance can be purchased to cover office buildings and their contents, with optional extras such as portable equipment coverage available to protect against theft or damage to laptops and mobile phones.
Directors of a business can be held personally accountable for the negligent running of a business resulting in loss to stakeholders, breaches of health and safety legislation or regulatory fines. Director and officers cover (also called Management Liability insurance) protects against these risks and more.