Our Practice Advice Service outlines how you will know if you have enough PII cover.

An old friend wishes to instruct my firm to act in a property purchase worth £4m. I shall need to consider the level of my professional indemnity insurance (PII) cover. What do you advise?

 For any firm which does not routinely carry out conveyancing work at that level the responsible action would be to refer the matter to a firm that does, otherwise you will be creating substantial difficulties for yourself when you come to renew your PII, greatly increasing the cost of premiums and limiting the number of insurers that will be willing to consider providing cover.

 Under the SRA Indemnity Insurance Rules 2019, rule 3.1, an authorised body must take out and maintain professional indemnity insurance that provides adequate and appropriate cover in respect of current or past practice taking into account any alternative arrangements the body or its clients may make. If you need cover above the compulsory level, known as ‘excess layer’ or ‘top up’ cover, this cover is not subject to the requirement to purchase it from an SRA participating insurer.

 This means that you can obtain it from any insurer and on different terms and conditions to the Minimum Terms and Conditions (MTC). However, it is important that you understand what is and is not included in the excess layer cover and the effect that this will have on any claims made. You are also not tied to purchasing it at the same time that you renew your MTC PII; you can purchase it at any time when the need arises, for example, if you are planning to take on additional work.

 However, it is not simply a matter of topping up cover for a single transaction or for a single indemnity year. The ‘claims made’ nature of the PII system makes it important to maintain that level of cover whilst a claim can still be brought in relation to that work. Therefore, in order to be protected, your firm may face higher premiums for a number of years. Six years after the completion of work undertaken is usually the minimum amount of time that excess layer cover is kept in place. For some transactions, that period should be longer, for example, in perpetuity. For this reason, it will be advisable to buy top-up cover for this risk too, as a single purchase.

 For further information see:

While every effort has been made to ensure the accuracy of the information in this article, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance upon the information given.

This article is compiled by the Law Society’s Practice Advice Service. Comments relating to the questions should be sent to practiceadvice@lawsociety.org.uk