What happens if you cannot renew your professional indemnity insurance

The information on this page is provisional and will be updated by the end of August 2020 to reflect new PII guidance.

Law firms are obliged under the Solicitors Regulation Authority (SRA) Indemnity Insurance Rules to have professional indemnity insurance (PII).

If you’re not able to renew your PII before it expires, your insurer will extend your policy for 90 days. This policy extension is to give you more time to arrange cover, but your firm will not be able to operate as usual for the whole of this 90-day period. 

What the 90-day policy extension means

The extension is made up of:

  • an extended indemnity period (EIP) of 30 days
  • a cessation period of 60 days

What happens during the EIP

Your firm can accept new work and practise as usual. If you get qualifying insurance during this time, the new insurer must backdate the policy to the start of this period.

To comply with regulatory obligations, you should email the SRA within five days of entering the policy extension period. It’s important for your firm to have a process in place to do this.

You must also tell the SRA if you get a backdated insurance policy, giving the name of your new insurer and the policy number.

If you do not have insurance at the end of the EIP, your firm will enter the 60-day cessation period. Rule 4.2 of the SRA Indemnity Insurance Rules requires firms unable to renew their insurance by the end of the EIP to cease practise promptly and by no later than the end of the cessation period.

What happens during the cessation period

Your firm will not be able to accept new work, although you can continue to work on existing instructions.

You should still try to get insurance during this period, but the policy must be backdated to the start of the 90-day policy extension period.

If you cannot get insurance by the end of this period, your firm will have to close. See rule 5.2 of the SRA’s Indemnity Insurance Rules. If your firm closes on or before the end of the cessation period, your insurer must provide you with the mandatory six years’ run-off cover. This will be backdated to the start of the 90-day policy extension period.

Insurance cover during the policy extension

Insurance for the policy extension period is provided by the same insurer that covered the previous indemnity period. It must meet the SRA’s minimum terms and conditions (MTC).

The MTC will cover activities if you breach the obligation in rule 5.2 of the SRA’s Indemnity Insurance Rules to take on no new work during the cessation period. But anyone breaching this rule may face disciplinary action and liability for reimbursement if the insurer experiences a loss as a result of the breach.

Cost of cover

The SRA does not regulate the cost of cover for the policy extension period. This is set by your insurer. Many insurers do not charge for this because these costs will be recovered through the run-off premium if the firm closes.

If your insurer does charge for additional premiums, details should be in your insurance policy or quotation pack. Ask your broker/insurer for more details about your specific circumstances.

If your firm is uninsured

It’s a disciplinary offence to practise without insurance.

The public needs to be able to claim against firms which do not have their own insurance. This includes run-off cover when these firms close.

If you firm does not have cover, any claims and associated costs, plus interest, can be recovered from your firm’s principals.

A grant may be provided for this by the SRA compensation fund (see rule 5 of the SRA Compensation Fund Rules 2011). The maximum grant that may be made is £2 million. This amount is being reviewed by the SRA.

If your insurer becomes insolvent

You have to find replacement cover “as soon as reasonably practicable and in any event within four weeks” (see Insolvency of a qualifying insurer in the SRA Handbook). You’ll need to buy an additional premium for this.

If you cannot get replacement cover, you’ll have to cease practising and your run-off cover will fall on the insolvent insurer.

Read our practice note on insolvency of a participating insurer.

Read our guide to insurers’ financial security.

Where to get support and advice

Our Practice Advice Service provides free and confidential support to Law Society members and employees of law firms. It’s staffed by experienced solicitors who can answer your questions and offer guidance.

Contact the Practice Advice Service