1. Claims made basis

It is important for practitioners to understand that the nature of professional indemnity insurance is different to that of road traffic insurance, employer liability insurance or public liability insurance. In the case of professional indemnity 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 notifies his insurer and not the date of negligence.

2. Run off cover

There is an obligation on solicitors pursuant to Statutory Instrument No 312 of 1995 to have run off cover 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 for a minimum period of six years. However, solicitors are strongly advised to have run off cover on a permanent basis as one cannot be sure that the Statute of Limitations will ban all actions 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. This is necessary because the insurance cover which one has whilst in private practice only covers claims made during the course of such private practice.

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.

3. Professional indemnity insurance details required by the Society

Solicitors are required to furnish the following confirmation from their insurers to the Society on a yearly basis, on renewal of cover:

1. Name(s) of underwriter(s) providing the cover. (If cover is provided by a Lloyds syndicate the reference name of the syndicate or syndicates should be stated.)
2. Minimum level of cover of £350,000 each and every claim, excluding costs and expenses. (It is important to check and examine policies to ensure that costs are not included in the £350,000 sum covered.)
3. Amount of self-insured excess on each and every claim.
4. Dates on which cover commences and expires.

(Actual policies should not be forwarded.)

1. Locum solicitors

There appear to be two problems arising under this heading.

1. Firms employing locum solicitors

Firms employing locum solicitors should make absolutely certain that their existing policy of insurance will cover locums. If not, they should take such steps as are necessary to provide that insurance. It may be that some insurers will require no extra premium while others will. 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 satisfies himself/herself that any locum in his/her employment is insured. It is also important to note that 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.

2. Locum solicitors

The committee is aware that the regulation requiring solicitors to have insurance for the full practice year prior to the issuing of the practising certificate has caused problems for locum solicitors. The committee reminds locum solicitors that it has power to grant a waiver of this requirement, upon written application to the committee. The practice adopted by the committee to date has been to accept professional indemnity insurance cover for the period of a particular locum position and require an undertaking from the locum solicitor not to practise without first putting in place proper professional indemnity insurance, and to then issue a practising certificate on this basis.

1. Changing employment

The regulations provide that it is the responsibility of the individual solicitor to ensure that professional indemnity insurance cover is in place and it is 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.

2. Break in insurance cover

Apart from the obvious consequences of a break in insurance cover, there are less obvious consequences. Failure to keep insurance cover in place will almost certainly result in a gap between the expiry of one practising certificate and the commencement date of the next practising certificate. This may render a person ineligible for a judicial appointment or other appointments which require a minimum number of years in practice prior to the date on which an application for such appointment is made.

3. Solicitors employed in the public and corporate sectors

These solicitors are exempted from the necessity for having professional indemnity insurance. The exemption does not extend to exempt such solicitors from the necessity of having run off cover in respect of previous private practice.

Should they engage in the provision of legal services outside the scope of their employment, they will come within the scope of the regulations and therefore will require professional indemnity insurance. The provision of legal services may be as simple as providing advice for family or friends.

This, if it is negligent, might leave them personally liable and accordingly it is clear that it would be prudent in any event that they have insurance cover in place.

4. Worldwide cover

Solicitors giving advice on legal matters outside the jurisdiction should check their professional indemnity insurance policies to ensure they have such cover, as the policies on offer vary.

5. Minimum level of cover

The committee is aware that the sum of £350,000 for each and every claim (excluding costs and expenses) may not provide adequate cover for all solicitors in private practice and advises each solicitor to evaluate for themselves what they consider to be the relevant level of cover for their particular practice. Thought should be given to situations where higher cover is obtained for a particular case, as it may then be necessary to continue to have the higher cover in place as claims are (as already stated) on a claims made basis.

6. Solicitors employing law agents/law searcher/other third parties

The question of the relationship between solicitors and law agents/law searchers/other third parties carrying out tasks for clients on their behalf is currently being reviewed by the Society. There are situations in which difficult questions of responsibility and liability arise and all practitioners are cautioned to be mindful of these situations.

The committee in this practice note has attempted to highlight some of the problems that have come to light since the regulations came into force. Practitioners will understand that in a practice note of this type is it impossible to cover the whole range of problems that may arise, or to give authoritative advice on issues involving individual queries. Expert advice should be sought from your insurer or broker.

The simplest answer to all of the problems, however, is for practitioners to ensure that at all times they have cover not only for themselves but their employees as appropriate.

The committee welcomes any queries or suggestions particularly those which may be of general interest to the profession.