Professional Indemnity FAQs

Should I move my renewal date to a different date?

There is no simple answer to this question. Some insurers are offering clients a range of renewal dates, while others are not. There may be some potential saving on offer for a longer policy, but this does not appear to be the trend to date.

From the firm’s perspective, the best reason for considering moving your renewal is if a 31st March renewal does not sit well with your Practice’s Financial Year End.

To discuss the issue in more detail, pick up the phone to one of our Solicitors’ Team, who will be happy to assist.

What if my law firm requires more than $2 million PII cover?

If your law firm practice requires PII cover over the primary limit of $2 million, you will need to get additional Top Up coverage up to the limit you need. Remember to consider that the $2 million limit under your primary policy includes your legal defence costs. Contact us for a competitive quote.

How do I determine the level of top up cover I need?

You need to ensure that you have in place an appropriate level of cover.  While there remains a regulatory minimum level of cover for law firms, this may not be adequate, given the nature of the work your firm undertakes.

In determining what an appropriate level of cover is, you should consider your current work, your anticipated future work and your past work.  You should consider a minimum of 6 years’ work history, but we would recommend at least 10 years’ history be considered.

Remember that your PII policy is a ‘claims made’ policy.  This means that the available cover is determined by the cover you have in place at the time a claim is made, not when the work was undertaken.  Many claims, particularly arising from property, wills and trusts, tax, corporate and commercial work, arise several years after the actual error was made. 

Be alert to the fact that the potential claim value can be more than the face value of the transaction.  For example, an options claim may be for the lost development value of a piece of land rather than the actual cost of the land when purchased.  Clients circumstances also change, which can have an impact on the quantum of certain types of claim.

Can I obtain cover for one high value transaction only?

No. If you wanted the benefit of additional cover, this would have to be taken out for the firm, for the whole year (or remainder of the insurance year, if purchased after your PII renewal).

Please note, as cover is on a ‘claims made’ basis, it is not advisable to take out additional cover for one year only – and, increasingly, commercial clients will require that a certain level of cover is retained for a number of years following the transaction. Practices should therefore consider whether the transaction value will be a one-off, and whether the fees generated justify the long-term impact on the cost of the practice’s PII.

We can provide you with indicative quotations for additional cover as required.

What are the most likely types of matters that exceed the $2m limit?

Claims from high net worth clients regarding allegations of negligent tax advice, drafting of family law binding financial agreements, deeds outlining the ownership or distribution of income from family assets and the settlement of family disputes may result in claims exceeding the $2m limit.

Claims made by high value groups such as superannuation funds, trustees, owners’ corporations and class actions increase the risk of high claims costs due to the combined value of claims and extent of associated legal costs.

Claims made during a volatile property markets involving claims against lawyers undertaking property work where there are delays or contract completion issues, financing problems and when there are fewer purchasers.

I have been offered a significant premium saving by moving to an unrated insurer. Should I accept this offer?

At a time when the financial pressures on law firms are at an all time high, it is very understandable that firms are looking for ways to save on the costs of their PII insurance.

Insuring with an un-rated carrier brings with it genuine risks for the practice and its partners/members. Un-rated insurers do not carry adequate reserves to meet the requirements of reputable brokers such as Lockton. There is a significant risk that they may not have financial strength to pay out the claims arising from the solicitors on their book of business. This is even more likely to be an issue as it is often practices with poor claims records that insure with un-rated carriers.

While your practice may save money in the short-term, there is a considerable risk that, if your insurer becomes insolvent, partners/members may become personally liable for the cost of any claims.

If your un-rated insurer becomes insolvent, you may also find it much more difficult, subsequently, to obtain insurance from a rated insurer.

If you have concerns about your current premium, and want to know practical ways to reduce this, contact our Solicitors’ Team. We work hard for our clients to ensure that they pay as little as possible for the high quality of cover that they require.