Can Solicitors practice without indemnity insurance?

Whilst it’s inadvisable to provide any form of professional advice or service without insurance, there are some circumstances in which indemnity insurance is not a legal or regulatory necessity. The NimbleFins solicitors professional indemnity insurance guide provides detailed information on solicitors’ professional indemnity requirements and frequently asked questions.

What is solicitor professional indemnity insurance?

Solicitor professional indemnity insurance is a policy that protects solicitors against allegations that their advice or services have been negligent, resulting in losses to their clients. It provides expert third-party advice, legal fee coverage and ultimately can cover any costs or fees awarded by courts following a claim.

Can a solicitor provide advice without indemnity insurance? 

Whilst in some cases a solicitor can legally provide advice without indemnity insurance, in reality all solicitors should have indemnity insurance if they provide advice.

If a solicitor is exempt from SRA Indemnity insurance rules and has not signed a contract with a customer stating that they hold indemnity insurance, then a solicitor can provide legal advice without indemnity insurance. However, even if a solicitor is exempt and not bound by a contract they could still be held accountable for client losses that resulted from their advice and services. As a result, all solicitors should have indemnity insurance, even when it’s not technically required.

Why do solicitors need professional indemnity insurance? 

Solicitors need professional indemnity insurance because they provide everyday people and businesses with professional advice based on their speciality. Experts much demonstrate a duty of care towards their clients, which means ensuring that advice given to clients is correct. The advice must not be negligent or likely to result in damage to clients or other parties.

Since solicitors sometimes work in situations that can involve significant gains or losses for their clients, a professional indemnity policy that covers allegations of negligence as well as proven negligent situations is an important feature that can save a business from financial ruin.

What firms are exempt from SRA Indemnity insurance Rules? {#SRA}

To find out if a firm is exempt from SRA indemnity insurance rules, check out their guidance. This guide explains if a business needs to be authorised by the SRA to provide legal services, or if they are exempt. While it is ultimately a business’s responsibility to determine whether they are exempt or not, the following types of businesses generally do not require SRA authorisation and would therefore be exempt from PII requirements:

• A person or business providing unreserved legal services
• Charities
• Independent trade unions
• Community interest companies
• Businesses regulated by OISC or the FCA
• Businesses regulated by an approved regulator other than the SRA

Do in house solicitors need professional indemnity insurance? 

Not in their own name, however their employer has a responsibility to ensure that they are covered on the business’s PI insurance policy. If the company itself is subject to SRA regulation then this policy must be SRA compliant.

Does a consultant solicitor need their own PI insurance?

A solicitor under the umbrella of a larger consultancy firm will only need to be covered under the company’s insurance policy. However, a sole practitioner/freelancer would need to obtain their own professional indemnity insurance.

Beware assurances that a clients’ policy covers ‘your work’ rather than ‘you’, as it’s often possible to cover the activities of subcontractors and consultants on policies in the event that a client is sued for the work, but insurers will then reserve the right to pass the claim on to the consultant or subcontractor responsible. Being named on a policy as an ‘additional insured’ will prevent this.

Do solicitors need any other insurance policies?

Anyone interacting with members of the public or other third parties would benefit from some Public Liability insurance, which protects against claims of injury to others or damage to property.

If a solicitor or law firms employs anyone, then Employers’ Liability is a legal requirement which protects against claims that employees have become injured or ill as a result of their work.

A law firm or solicitor might need a form of office insurance or simply contents insurance. Office insurance can cover office buildings and contents such as furniture and business equipment such as  laptops and mobile phones.

Directors of a business can benefit from Director and officers insurance as they can be held personally accountable for the negligent running of a business resulting in loss to stakeholders, breaches of health and safety legislation or regulatory fines.

Claire James

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