Professional Indemnity Insurance Renewal

Professional Indemnity Insurance 02/10/2020

The mandatory professional indemnity insurance (PII) renewal date for all firms is 1 December 2020. This date is not negotiable. All cover under the current indemnity period will expire on 30 November 2020. It should be noted that firms should not provide legal services for any period of time without PII cover in place.

Confirmation of cover

All firms must ensure that confirmation of their PII cover is provided to the Society within three working days of 1 December 2020, including those firms with variable or staggered renewal dates. Therefore, confirmation of cover in the designated form must be provided to the Society on or before close of business on Friday 4 December 2020.

Confirmation of cover should be provided by your broker through the Society’s online PII confirmation system. Such confirmation must include your policy number, and confirmation of cover cannot be provided until the policy is actually in place. As your firm has a statutory obligation to ensure such confirmation of cover is provided to the Society on or before Friday 4 December 2020, you are responsible for ensuring that your broker provides the Society with confirmation of cover by that date. You should also ensure that your broker has familiarised themselves with the online confirmation system and has the necessary information to confirm cover online (such as their login and password) in advance of 1 December 2020.

Staggered or variable renewal dates have been permitted since 2011. It is noted that some firms who have confirmed PII cover to the Society during 2020 have a coverage period that extends past 30 November 2020. Such firms are still required to reconfirm cover for 2020/2021 with the Society by 4 December 2020.

Please note that your firm will not be reflected as having PII in place on the Society’s ‘Find a Firm’ online search facility until such time as the Society has received the required online confirmation of cover.

Renewal resources

Renewal resources for the 2020/2021 indemnity period are available to download from the Society website at www.lawsociety.ie/PII and include the common proposal form, PII regulations and minimum terms and conditions, Participating Insurers Agreement, and relevant PII practice notes. The information available is frequently updated as more documentation becomes available.

Guide to renewal

The guide to renewal for the 2020/2021 indemnity period will be published on the Society’s website on 4 November 2020 to assist the profession with renewal. The guide includes information such as tips for renewal, important points to note, and a guide to insurers and brokers. This guide will be updated frequently with new information received by the Society, in particular with regard to what insurers will be in the market in the next indemnity period. 

Financial strength rating 

There is a minimum financial strength rating requirement from a recognised rating agency for all participating insurers of A (S&P, Fitch) or equivalent. The recognised rating agencies are Standard & Poor’s, Fitch, AM Best, and Moody’s. 

It should be noted that all participating insurers in the market are permitted to write insurance in this jurisdiction under the supervision of the Central Bank. The Society is not responsible for policing the financial stability of any insurer. The Society does not vet, approve, or regulate insurers.

Notification of claims

All claims made against solicitors’ firms and circumstances that may give rise to such a claim should be notified to the firm’s insurer as soon as possible. In particular, claims made between 1 December 2019 and 30 November 2020 (both dates inclusive) should be notified by the firm to their insurer by 30 November 2020. 

It is proper practice for firms to notify insurers of claims or circumstances during the year as they arise, not at the end of the indemnity period. Notifying all claims and circumstances at the end of the indemnity period is referred to as ‘laundry listing’ by insurers, and is not looked on favourably. Firms should also ensure that their claims and circumstances notifications meet the notifications requirements set out in the insurance policy terms and conditions.

The minimum terms and conditions for PII permit firms to report claims or circumstances of which they are aware prior to expiry of cover to their insurer within three working days immediately following the end of the coverage period. Therefore, a three-working-day grace period from 30 November 2020 is in place with regard to notification of claims and circumstances to your insurer.

Quotes

Insurers are required to leave quotes to firms open for a period of not less than ten working days. 

Run-off Fund

The Run-off Fund provides run-off cover for firms ceasing practice (a) who have renewed their PII for the current indemnity period, and (b) subject to meeting eligibility criteria, including that there is no succeeding practice in respect of the firm.

Any firm intending to cease practice after 30 November 2020 is required to renew cover for the 2020/2021 indemnity period. 

Any applications to the Run-off Fund for cover must be made directly to the Special Purpose Fund Manager, not the Society. Further information on run-off cover and succeeding practices, including the contact details of the Special Purpose Fund Manager, can be found on the Society’s website at www.lawsociety.ie/PII. 

Run-off compliance

Provisions are in place to ensure the required level of compliance of firms in the Run-off Fund with the Special Purpose Fund Manager with regard to claims and membership of the Run-off Fund. 

Under these provisions, three levels of run-off cover exist, depending on the compliance of run-off firms:

  • Compliant run-off firms have cover in the Run-off Fund with the same minimum terms and conditions as those which exist in the market,
  • Non-compliant run-off firms have reduced cover in the Run-off Fund with the same minimum terms and conditions as those that exist in the market, with the exception that there is no cover for claims by financial institutions,
  • ARP run-off firms continue to have cover in the Run-off Fund at the same level that exist in the ARP, with aggregate cover and no cover for claims by financial institutions.

Further information on changes to run-off cover provisions can be found on the Society’s website at www.lawsociety.ie/PII.

Amendments to cover

The main amendments to the PII regulations for the 2020/2021 indemnity period are:

  • Run-off cover in the Run-off Fund will be reduced to six years for new entrants. This change is a return to the market norm.
  • Run-off Fund premium – currently there is no premium for any entrants to the Run-off Fund. The majority of claims in the Run-off Fund come from a minority of non-compliant firms. As such, premiums will be introduced for two classes of non-compliant run-off firms on ‘polluter pays’ grounds, with normal compliant firms continuing to have run-off cover for free.
  • A premium will be introduced in the Run-off Fund for distressed entrants – that is, firms that are closed by order of the High Court (strike-off, suspension, abandonment).
  • A premium will be introduced for non-compliant run-off firms (that is, firms that have failed to comply with the rules of the Run-off Fund). This premium will be lower than the distressed firm premium and will be charged for whatever period of time that the firm is non-compliant. 

Every firm that applies to enter the Run-off Fund will be required to have a risk-management audit by the SPF Manager. This will be one-to-one practice advisory audit and guidance by the SPF Manager to assist firms on proper wind-down procedures. There are a number of benefits to this. The audit creates a relationship between the firm and the SPF Manager that should improve the wind down of firms and minimise claims. The audit will provide the firm with cheap, expert one-to-one advice on their closure. The audit will also increase the chances that the firm may obtain a succeeding practice instead of entering the Run-off Fund due to improved wind-down procedures.

Insurers will not be responsible for the Special Purpose Fund liabilities of insolvent insurers. 

The 1% minimum contribution to the Special Purpose Fund for insurers will be removed. This has been acting as a barrier for entry to new insurers.

PII helpline

The Society continues to operate the PII Helpline to assist firms in dealing with PII queries. The helpline is available Monday to Friday, 10am to 4pm, to assist firms with PII queries at tel: 01 879 8707 or email: piihelpline@lawsociety.ie.