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Do In House Solicitors Need Professional Indemnity Insurance?

Professional indemnity (PI) insurance is effectively commercial insurance that is designed to protect the owners of a business if their clients make a claim against them.  Any organisation involved in providing professional services or providing advice to clients could potentially face a claim against it by clients.  An indemnity refers to compensation for loss or damages, and a solicitors professional indemnity insurance policy serves to ensure that if a claim is made against a solicitor in their professional capacity, then they are covered for any loss or damages claimed.

The main benefits of having a PI insurance policy are as follows:

  • Protection from claims – financial losses incurred by clients making a claim against a law firm or solicitor can be crippling. Having an insurance policy in place means that the insurer can bear the costs of the defence and any damages.
  • Legal shield – PI insurance policies ensure that the insured is protected against repercussions against claims relating to negligence, error, or omission.
  • Reputational credibility – having an insurance policy in place not only enhances goodwill but also increases brand reputation and image. In addition, clients are more likely to feel comfortable coming to a solicitor for advice if the solicitor has insurance in place in the event that things go wrong.
  • Protection – PI insurance policies protect the reputation of the profession and the individuals within it, but also offer protection to clients.
  • Tenders and business development – for many organisations, including law firms, their regulatory body demands that PI insurance is in place. In addition, clients who offer work through a tendering system often also request that adequate insurance is in place.

Is An Individual Solicitor Insured Or A Law Firm?

As part of the profession’s regulatory requirements, solicitors need to have professional indemnity insurance in place.  It is a mandatory requirement courtesy of the Solicitors Act 1974, which requires that all law firms must have solicitors PI insurance.

In addition to the 1974 Solicitors Act, the Solicitors Regulation Authority has strict rules about solicitors and PI insurance.  The rules require that adequate PI insurance must be in place before advice is given by solicitors and stipulates the level of cover that needs to be in place for its members.  The Solicitors Regulation Authority also requires firms to self-assess and ensure that any level of PI cover obtained is commensurate with the level of risk exposure they expect.

One example of this is where a medium-size firm has large corporate clients and complex transactions to deal with.  The type and scope of work a firm undertakes determine the level of cover they are likely to need. Many small to medium sized businesses have indemnity insurance policies that are wide-ranging as they want to ensure that they are covered for the breadth of work they undertake.  The Solicitors Regulation Authority requires firms to assess their risk exposure and potential liability for any losses incurred.

Level Of Indemnity Cover

Law firms should consider the following when deciding on the level of indemnity they need:

  • Level of fee income
  • Risk management
  • Potential risk exposure
  • Size of firm
  • Type of scope
  • Client base
  • Previous risk and claims history

A PI insurance policy should cover the following:


Law Society – Solicitors Professional Indemnity Insurance

Solicitors working in organisations that are not law firms, including sole practitioners, law centres and charities, must also ensure they have adequate PI insurance in place.

According to the Law Society, law firms need to be proactive and ensure that there is PI insurance in place at all times.

Not only is PI insurance a requirement of the Solicitors Regulation Authority, but solicitors also need to have an insurance policy in place to provide essential cover against civil liability claims.  Having appropriate PI insurance in place also means that businesses can increase their financial viability by ensuring that they are financially protected in the event of a claim made against them.  The right indemnity insurance policy is an added layer of protection and risk management for businesses.

PI insurance provides peace of mind.  In firms where there are multiple solicitors, PI insurance means that if claims of negligence are made, the firm is in a position to defend itself and mitigate the financial losses incurred.


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