All law firms must have $2 million of compulsory insurance but is that enough? Consider the work you are seeking to do or are now undertaking. It may be exactly the work you have been seeking for years but you need to now consider – are you underinsured?

Consider what would happen if a claim was made against your firm for an alleged error or omission, particularly when it involves a large or complex transaction. Your liability for damages and defence costs would accumulate significantly, with devastating effects for your business if you are not insured.

What is “top up” professional indemnity insurance?

Your professional indemnity insurance may only currently be the compulsory limit imposed, but is it enough?

The various Law Societies or Law Institutes around Australia provide compulsory insurance which protects Solicitors against claims of negligence or other act, error or omission made against them by a client. But this type of insurance only goes so far. Depending on the area of law you practice, the work you do and the size of your firm, this cover may not be enough. You may need to top it up with higher limits.

While most claims are settled out of court and confidentially, there is enough precedent set to show that not all claims will remain less than the minimum limit of indemnity. You may need more.

You are not obliged to seek top up cover from the same insurer. In fact, we suggest you should investigate the differences in what the policies might offer in terms of pricing and policy wording.

Who does it affect?

If you are unfortunate enough to have a claim for more tor than the current compulsory layer, then it could be you personally or your company that will be liable for the difference (depending on how you are structured). Can you really afford to pay above your current limit? Can your family afford to lose their home when it could have been protected with some extra cover?

Why is it useful?

Losing a claim made against you can result in enormous costs and expenses. Some of these claims take years to settle, leaving a large bill for court costs and legal expenses. Even when successful, defending a claim can be costly. Can you be sure your current limit is enough? Why not give yourself “peace of mind”.

Based on direct experience from lawyers with claims made against them, the first thing that the senior partner considers when advised of the claim, is if the likely damages could exceed the limit of cover. If the answer is possibly or yes, then the proceedings immediately take on a different complexion.

Where to seek assistance?

Professional indemnity is a complex and specialised area of insurance. If you want to know more about the professional indemnity policies and conditions relevant to the legal profession, we recommend you consider a group that knows the profession well.

Law Protect has referral arrangements with dedicated specialist insurance brokers who know the legal profession intimately. We can refer you to experts in the industry for top-up insurance for firms and practitioners who have their compulsory primary cover elsewhere and we confidently recommend you check the policy options.