Claims Made Basis

Practitioners should note that professional indemnity insurance is provided on a claims made basis and not on the basis of occurrence coverage. Therefore it is different to that of road traffic insurance, employer liability insurance or public liability insurance. The relevant cover is the cover that pertains on the date the claim is first made or the insured first becomes aware of a circumstance likely to give rise to a claim and notified his/her insurer and not the date of negligence.

The fact that cover is provided on a claims made basis has particular significance when a solicitor decides to obtain top-up cover for a single transaction, as such cover cannot be obtained on the basis of a single transaction. Therefore, by reason of professional indemnity insurance cover being provided on a claims made basis, the solicitor should continue to obtain at least the same level of top-up cover indefinitely. Alternatively, the solicitor should decide not to undertake the work necessitating obtaining top-up as it may be financially prohibitive due to the additional premium which would have to be paid annually.

For example, if a solicitor acts in a conveyancing transaction during the current year for a figure of €3 million, it will not only be necessary for that solicitor to increase his professional indemnity insurance cover to €3 million for the current year, but it will also be necessary to take out at least a similar level of cover for a considerable period of time in the future. The likely increase in the value of the said land/property overtime should also be taken into account when renewing cover.

Professional Indemnity Insurance details required by the Society

Solicitors are required to furnish (or cause to be furnished) to the Society on a yearly basis confirmation from either their insurer or broker that they have arranged professional indemnity insurance cover. The Society is not in a position to issue a practising certificate until it is in receipt of such confirmation of cover.

The confirmation of cover must provide the following information:

(a) Name(s) of the solicitor(s) to whom cover is being provided.

(b) Address of practice.

(c) Name(s) of the insurer(s) providing the cover. If cover is provided by a Lloyd syndicate(s) the number of the syndicate(s) should be stated together with the percentage of cover provided by each participating syndicate(s).

(d) State the minimum level of cover i.e. €1.3 million each and every claim.

(e) Amount of self-insured excess on each and every claim. (f) Dates on which cover commences and expires.

(A precedent form of confirmation of cover is available from the Society. Actual policies should not be forwarded to the Society.)

It should be noted that the Society has endeavoured in recent years to obtain the confirmation of cover directly from the insurer/broker but has encountered difficulties with particular brokers in obtaining the confirmation of cover on a timely basis and in the correct format. Therefore, it is necessary for the Society to place the obligation and onus on each solicitor to ensure that when applying for a practising certificate in January 2003 that the application form furnished to the Society has attached to it the relevant confirmation of cover. As already stated, the Society will not issue the solicitor with a practising certificate until such time the said confirmation of cover is received.

When a solicitor is renewing cover he/she should ensure their insurer/broker will be in a position to furnish them with such confirmation of cover in early January at the very latest.

Run-off Cover

There is an obligation on solicitors pursuant to Statutory Instrument No.362 of 1999 to have run-off cover in place when they cease private practice. This may arise, for example, if they retire, emigrate, move to the corporate sector or are appointed to judicial office. The obligation pursuant to the regulations is to have run-off cover in place for a minimum period of two years. However, solicitors are strongly advised to have run-off cover for a minimum period of six years as one cannot be sure that the Statute of Limitations will prohibit all actions even after six years, for instance in the case of a minor or a person of unsound mind.

Run-off cover is required in respect of acts of negligence which may have occurred during the course of private practice but which do not surface, in the form of a claim, until after the solicitor has ceased private practice. Such cover is necessary because the insurance cover which a solicitor has whilst in private practice only covers claims made during the course of such private practice, i.e. professional indemnity insurance cover being provided on a claims made basis.

Apart from the fact that run-off cover is a legal obligation, it is obviously very desirable for practitioners to ensure that they have this cover, as the consequences of a claim could be catastrophic, as the solicitor could become personally liable in the event of a claim arising.

Practitioners considering commencing in practice on their own behalf should consider the cost of run-off cover, as they may decide within a short period to cease practise.

Firms employing Locum Solicitors/Assistant Solicitors

Firms employing locum/assistant solicitors should make absolutely certain that their existing policy of insurance will cover locums/assistant solicitors. If not, they should take such steps as are necessary to put such cover in place. It might be that some insurers will require no extra premium while others will do so, and they may also require each individual solicitor in the practice to be named on the policy as a condition of cover. It is emphasised, however, that while it is the legal obligation of each solicitor to have cover, prudence should prevail in this matter whereby an employer should satisfy himself/herself that any locum/assistant solicitor in his/her employment is insured. Some locum solicitors may have their own insurance, however, such independent insurance will only cover the locum's liability in the event of negligence and not the liability of the employer, on whose behalf and in whose name the work is carried out, therefore, all employers should ensure that each solicitor in their practice is covered by professional indemnity insurance.

Changing Employment

The regulations provide that it is the responsibility of the individual solicitor to ensure that professional indemnity insurance cover is in place, not that of the employer.

The solicitor is also required, within a period of not more than 21 days of changing employment, to furnish (or cause to be furnished) written confirmation from a qualified insurer that the solicitor has and maintains the minimum level of cover for the remaining part of that practice year.

While a practising certificate is in place for the calendar year and travels with a solicitor when changing employment, the relevant professional indemnity insurance cover does not travel with the solicitor, as it is expires when a solicitor leaves a practice and therefore a solicitor should ensure that his/her new employer has extended the cover to include him/her.