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A simple guide to making a successful renewal application for Solicitors Professional Indemnity Insurance

Professional indemnity insurance is an essential element of professional practice for law firms, providing protection against claims for errors, omissions, or negligent acts. Cover is mandatory and the required terms of the cover are clearly set out in the SRA’s Solicitors Professional Indemnity Insurance Minimum Terms and Conditions.

For established law firms, a renewal offer of Solicitors Professional Indemnity Insurance is essential to the continuance of the firm. Leaders of law firms live in fear of the annual renewal cycle and the risks of not being offered renewal, or at least not being offered terms that are reasonable or manageable.

To maximise the chances of success (i.e. receiving preferential renewal terms from the insurance market), it is important that the renewal application for solicitors professional indemnity insurance is completed accurately and thoroughly and that all of the necessary supporting information is included.

This simple guide aims to provide an overview of what solicitors need to consider when completing a renewal application for solicitor’s professional indemnity insurance for an established law firm, and how to get the most out of the renewal process.

1) Assess the risk to the firm (and the cover required).

SRA regulations make your firm responsible for assessing its exposure to risk and purchasing the appropriate level of professional indemnity insurance (PII) cover in general, for both current and past work.

It is very important, as part of the renewal process, to carefully assess the firm’s exposure to claims, and the maximum value of any claims

The professional indemnity cover level required is based on the firm’s structure, size, and practice style:

  • firms defined by the SRA as relevant recognised bodies and relevant licensed bodies are obliged to have cover of at least £3 million for any one claim. For a definition of relevant recognised bodies and relevant licensed bodies see the glossary on the SRA website
  • in all other cases, for example sole practitioners and partnership firms, cover of at least £2 million for any one claim is required

2) Fee Income and Areas of Practice

Solicitors must provide accurate fee income figures for the last six years, the current year, and the forthcoming year- and a breakdown of the areas of practice from where income is derived. This is to enable the insurer to assess the risk exposure of the firm, determine premium and may also impact the level of cover required and excesses applicable.

The areas of practice should be detailed, including the nature of the work involved and the experience of the solicitors in that area. This will help the insurer to assess the ability of the firm to manage the risks associated with the work being carried out and determine the appropriate premium and applicable policy excesses.

3) Adverse/Claims History

It is essential that solicitors provide full details of any adverse/claims history in their application for solicitor’s professional indemnity insurance. This includes details of any claims made against previous firms where the solicitor was a principal or employee, claims made directly against the solicitor, or any regulatory complaints or investigations.

Solicitors need to ensure that they disclose all relevant details of adverse history, including the nature of the claim or complaint, the parties involved, and the outcomes of any investigations or court proceedings.

It is also crucial to provide any supporting documents, such as confirmed claims experience, court judgments or regulatory reports, to ensure the insurer has a complete understanding of the adverse history.

4) Successor practices

If the firm is a successor practice, or intends to become a successor practice, full details must be provided of the prior practice, including full claims and regulatory history and where relevant, details of run-off cover. This information is necessary for the insurer to assess the risk exposure of the firm, as well as to ensure that the new practice is not inheriting any potential prior practice liabilities from the previous practice.

5) Additional Supporting Documents

Additional supporting documents to supplement the application for solicitor’s professional indemnity insurance should be included pre-emptively. These should include:

  • Business Plan (see our separate guide)
  • Three year cash flow projections (see our separate guide)
  • Detailed CV’s for all lawyers and key personnel (including details of prior relevant experience for those who will hold management/compliance/regulatory functions)
  • Risk management policies and procedures Inc. details of Cyber risk management (and what on-going training is provided to staff on cyber risk)
  • Client care letters and terms of business
  • Anti-money laundering policy and procedures
  • Details of any anticipated significant changes to the firm or its personnel

AND, where relevant:

  • Full details of any adverse history / claims history
  • Full details of any prior practices Inc. 6 years claims experience
  • Full details of any financial services undertaken

Completing an application for professional indemnity insurance can be a complex and time consuming process, but it is essential to provide a thorough application to present the firm accurately and to maximise the likelihood of Insurers providing (good) terms.

Full details must be provided, of adverse/claims history, estimated fee income, areas of practice, and any prior practices – as well as any necessary supporting documents.

By following these guidelines, law firms can ensure that their renewal application for solicitor’s professional indemnity insurance is successful.

The Regulated Risks team will provide full support with completion of your Solicitors Professional Indemnity proposal and will review and provide feedback, before any submissions are made to potential insurers.

Written 11th January 2024

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