Solicitors: PII renewed? What next?

Your professional indemnity insurance (PII) renewal should now be complete, and you will have no doubt breathed a sign of relief.

Time to file all the emails and documents, get on with your day job and forget about PII until a few months ahead of your next renewal……or is it?  PII is a year-round process.  

This article provides guidance and advice on the effective management of your PII throughout the policy year, whenever your renewal date.

Scope of PII information to be shared with clients.

It is important that you understand what your obligations are regarding the sharing of PII information. The Provision of Services Regulations 2009 (as amended) continue to apply post Brexit and clause 8(n) requires you to provide clients with:

The Regulations then go further to provide that the requirement will be satisfied if the information:

It is also important to be aware of the requirements of Rule 9 of the SRA Indemnity Insurance Rules (“the Rules”) if a claim is made or intimated against the firm or any person insured under the firm’s policy. Rule 9 requires the firm and each principal to disclose, upon request:

There is no obligation on you to provide any additional information about your cover and we would advise that you do not provide anything further without prior discussion with your insurer, particularly if your policy has a clause restricting you from disclosing details and policy documentation without your insurer's consent.

Establish appropriate point(s) of contact

It is helpful to nominate a select number of individuals to be responsible for managing communication with your insurance broker. One point of contact will suffice in smaller firms, but for larger businesses, two or three may be more appropriate. We strongly recommend that only one person is responsible for notifying claims and circumstances. Clarity regarding the appropriate point(s) of contact will ensure that:

Prompt notification of claims and circumstances

Always ensure that you understand what your insurer requires regarding the notification of claims and circumstances. Policy wordings will differ, but all require prompt notification of claims and circumstances  and use words such as “as soon as possible” or “as soon as reasonably practicable”. You should refer to your current policy for the precise wording, but the golden rule is not to delay in making any notification.

If you are ever uncertain as to whether or not a matter should be notified to insurers, our solicitors’ claims team here at Howden is here to help. You might also be interested to review our article on this subject entitled “To notify or not to notify” which is available here.

Notify material information

You should inform your broker of basic changes regarding your business; for example, a new correspondence address or a change of key contact.

All principals and employees should understand exactly what they need to do if they receive a communication from a client that suggests that a notification needs to be made to insurers. Ensure everyone understands the importance of notifying issues as and when they arise. This should be supported by firm-wide communications periodically throughout the year, requesting confirmation that there are no matters to notify. It is preferable for this exercise to be undertaken at regular intervals, as opposed to it being an annual event as you fill in your proposal form for renewal. This avoids the complications that can arise if there is a last-minute influx of notifications when renewal terms are being negotiated.

Even more importantly, you owe a legal duty of disclosure to your insurer(s), which includes your duty to make a fair presentation of your risk (Section 3 of the Insurance Act 2015). This duty runs throughout the course of the policy year.

A ‘fair presentation’ is one which clearly discloses all material circumstances which your senior management, including those responsible for managing insurance, know or ought to know following a reasonable search. A circumstance is material if it would influence an insurer’s judgement about whether or not to underwrite a risk and, if so, at what premium and on what terms. It would include, for example, a firm diversifying into a higher risk area of work. If you are not sure if a development is material, then once again the team here at Howden is available to assist and discuss the issue with you.

Beware incurring contractual obligations that impact your PII

If a client asks you to agree to a new service contract that you believe contains onerous contractual terms, we recommend you talk to us about the coverage position under your PII policy. For example, if you sign up to onerous service standards that include a penalty for non-compliance, you are likely to find that your PII policy will not respond in the event of a claim that the agreed terms have been breached and the penalty is payable.

Early discussion about proposed mergers and acquisitions

Talk to us at the earliest opportunity if you are considering a merger or acquisition. Successor practice rules are complex and we can assist you to identify the relevant issues and determine further information required and the advice you might need.

For example, if the target business undertakes a lot of high risk work and its acquisition would significantly change your firm’s risk profile, you may inadvertently be restricting the number of insurers who will be willing to insure your business in the future. It is better to know this sooner rather than later.

We can also discuss your proposals with your existing insurer to identify what the potential impact of the merger might be on their continued appetite for your business, and the extent of any additional premium which may be payable.

For those who are interested to read more on this subject we recommend our article entitled “Buying or merging with another law firm? Proceed with care” available here.

We are specialists in solicitors’ PII. Do not hesitate to call on us throughout the policy year. We are here to help and there is no such thing as a stupid question when it comes to protecting your firm and minimising risk.