James Graham, deputy head of professional indemnity and cyber at Travelers, outlines the best practices to follow when advising on PI cover for smaller solicitors - their reputations will likely depend on it

Solicitors’ professional indemnity (PI) insurance is cover brokers’ clients hope they will never have to use. But there are good reasons why the profession’s regulatory bodies require practicing law firms to have it.

James Graham

James Graham

By protecting against civil liability claims, PI insurance enhances a firm’s financial security and protects its clients.

Allegations of professional negligence are common – and regardless of how well founded they may be, they can be difficult to defend. This is especially true when they relate to events far in the past. Key staff who were involved may have left, or simply forgotten crucial details.

By ensuring smaller solicitor clients have the right PI cover, brokers can mitigate the damaging consequences solicitors could face if they were held liable for financial losses as a result of advice they have given to clients.

In the process, brokers help to give solicitors peace of mind. When they know they are protected from exposures arising from the professional advice they provide, they can focus on running their firm as opposed to worrying about potential claims of professional negligence.

How much cover does a small firm need?

Brokers can be a valued partner to their small solicitor clients by ensuring they have sufficient PI cover.

While the Solicitors Regulation Authority (SRA) requires a minimum level of cover to be in place as a condition of membership, it also requires firms to assess themselves and purchase a level of PI commensurate with their own risk exposure.

For example, even if solicitor clients run a small to medium-sized firm, they may have large corporate clients instructing them on bigger, more complex transactions. Their liability for any losses will increase as a result.

To determine the appropriate amount of cover, solicitor clients will need to focus on what kind of work they’re doing, who they’re doing it for and how much it could cost if they were held liable for their loss. Brokers can help solicitors correctly gauge their potential exposure by ensuring their insurance protection aligns with the size of their clients and the contract values involved.

As part of this discussion, brokers can guide them on topics such as indemnity limits in client retainers. Some clients will only appoint firms that carry limits of £10m or more, in which case, they should either:

  • Place their insurance with an insurer that can offer limits above the minimum amounts required by the SRA.
  • Purchase top up cover - also known as excess layer capacity - to reach their desired amount.

How to help clients secure PI cover

Preparation is vital. Start the process as early as possible so that clients have enough time to compile renewal information.

The proposal form is an essential part of the renewal process. Advise solicitor clients to be clear and concise and provide plenty of supporting information. The latter can improve the underwriter’s understanding and provide the context they need to accurately assess the business.

One of the most important rating factors is a firm’s claims history. Insurers appreciate that claims happen, but when they do, they like to see evidence that the firm has learned lessons and implemented procedural changes to prevent a recurrence.

By providing the full story, brokers’ clients can give insurers a favourable impression of how well they run their business. This should help solicitors achieve the cover they want at an acceptable premium.

Read more about Travelers’ professional indemnity products here.

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