What Is Professional Indemnity Insurance - and Why Does It Matter for Your Claim?

If a professional has given you negligent advice or services, one of the first questions your solicitor will consider is whether there is a viable defendant who is “good for the money”. Professional indemnity insurance is often the answer.

Understanding what professional indemnity insurance is, and why it matters, can help you make sense of the claims process.

What is professional indemnity insurance?

Professional indemnity insurance (often referred to as "PII") is a type of insurance policy that protects professionals against claims made by clients who have suffered a loss as a result of their negligent advice or services.

In simple terms: if a professional makes a mistake that costs you money, their PII policy is what pays out.

Who is required to hold it?

Many professions in England and Wales are required by their regulatory body to hold professional indemnity insurance as a condition of practice. These include:

• Solicitors - regulated by the Solicitors Regulation Authority (SRA)
• Surveyors and valuers - regulated by the Royal Institution of Chartered Surveyors (RICS)
• Architects - regulated by the Architects Registration Board (ARB)
• Accountants - required by bodies such as the ICAEW and ACCA
• Financial advisers - regulated by the Financial Conduct Authority (FCA)
• Engineers and construction professionals - often required by their professional bodies

Why does this matter for your claim?

This is one of the most important practical points in any professional negligence case.

When something goes wrong on a building project, for example, the contractor responsible may have since dissolved their company, become insolvent, or simply lack the funds to pay any compensation awarded against them. Pursuing them through the courts can be a costly exercise with little chance of recovery.

A regulated professional, such as a surveyor, architect, or solicitor is a different matter. Because they are required to hold PII, there is typically an insurer standing behind them, meaning that a successful claim is far more likely to result in actual payment.

This is why, in many cases involving property, financial, or legal matters, your solicitor will look carefully at whether a professional was involved, and whether a negligence claim against them is viable alongside, or instead of, a claim against another party.

Does PII cover everything?

Not necessarily. There are some important limitations to be aware of:

• Policy limits - PII policies have a maximum level of cover. In most cases this is sufficient, but it is a relevant consideration in high-value claims.
• Exclusions - some policies exclude certain types of work or circumstances. This is something your solicitor will investigate.
• Run-off cover - when a professional retires or a firm closes, they are typically required to maintain "run-off" cover for a period of years. This means a claim may still be possible even if the firm no longer exists.
• Gaps in cover - in rare cases, a professional may have allowed their insurance to lapse. Your solicitor will look into this early in the process.

What does this mean for you in practice?

If you have suffered a loss and a regulated professional was involved the existence of PII makes a claim a realistic and worthwhile avenue to explore.

It does not guarantee success. You still need to establish that the professional was negligent and that their negligence caused your loss. But it does mean that if your claim succeeds, there is a real prospect of recovering the compensation you are owed.

How Smith Partnership can help

Our professional negligence team in Leicester advises clients on claims against a wide range of regulated professionals. We will assess your position honestly from the outset - including whether PII is likely to be in place and what that means for your prospects of recovery.

Get in touch with our specialist professional negligence solicitors today. Contact our team by telephone on 0116 247 2000, complete our contact form, or send us an email via info@smithpartnership.co.uk. 

We also have offices across the East Midlands and Staffordshire with contentious probate solicitors, in Burton, Derby, Stoke-On-Trent and Swadlincote.