What are the minimum PII requirements?

The following sets out the minimum requirements; many practitioners may consider that they need higher levels of cover.

The level of indemnity required by practitioners is calculated in relation to their annual fee income. Where a practitioner is in partnership, or has fellow directors in an incorporated firm, or employs full- or part-time staff, cover must also include fidelity guarantee insurance (FGI).

PII should provide cover in respect of all civil liability incurred in connection with the conduct of a firm’s business by the partners (or members and designated members of a limited liability partnership), directors or employees. FGI must include cover against any acts of fraud or dishonesty by any partner, director or employee in respect of money or goods held in trust by a firm. 

The detailed provisions setting out the minimum requirements are set out in the Global Practising Regulations 2.2.9:

2.2.9. Professional indemnity insurance

(1) Holders of a practising certificate

(a) Subject to regulation 9(6), applicants for and holders of a practising certificate must hold professional indemnity insurance (“PII”) covering the liabilities and according with the limits set out in this regulation 9 and, in the case of such a person whose firm employs full and/or part time staff, the firm must also hold a policy of fidelity guarantee insurance (“FGI”) in respect of all partners, directors, members and designated members of limited liability partnerships and employees in accordance with this regulation. For the avoidance of doubt such FGI may, but need not, form a single policy with such PII and all such PII and FGI must remain in force for all of the period during which a relevant practising certificate is held.

(b) Such PII and FGI may be effected with any reputable insurance company or insurance companies or other underwriter provided that Council reserves the right  to require applicants for or holders of a practising certificate not to use certain insurance companies or underwriters, if it so directs.

(2) Liabilities to be covered

PII shall provide cover in respect of all civil liability incurred in connection with the conduct of the firm’s business by the partners, directors, members and designated members of limited liability partnerships or employees and FGI shall include cover against any acts of fraud or dishonesty by any partner, director or employee in respect of money or goods held in trust by the firm.

(3) Limits

(a) Subject to regulation 9(3)(g), the limit of indemnity on PII in respect of each and every claim shall be:

(i) in the case of a person whose firm’s total income for the accounting year immediately preceding the year in question (the “relevant total income” and “relevant accounting year”) is less than or equal to £200,000, at least the greatest of:

(aa) two-and-one-half times that firm’s relevant total income; and

(bb) twenty-five times the largest fee raised by the firm during the relevant accounting year; and

(cc) £50,000;

(ii) in the case of a person whose firm’s relevant total income exceeds £200,000 but is less than or equal to £700,000, at least the greater of:

(aa) the aggregate of £300,000 and the firm’s relevant total income; and

(bb) twenty-five times the largest fee raised by the firm during the relevant

accounting year;

(iii) in the case of a person whose firm’s relevant total income exceeds £700,000, at least the greater of:

(aa) £1m; and

(bb) twenty-five times the largest fee raised by the firm during the relevant accounting year.

(b) The limit of indemnity on PII in respect of year 2000 date recognition claims, where available, may be on an aggregate basis as opposed to an each and every claim basis. The minimum limit on this cover must be calculated in accordance with regulation 9(3)(a).

(c) A firm’s “total income” is the aggregate of the firm’s professional charges and all other income (including commissions) received by a firm in respect of and in the course of the firm’s business, but excluding any commission which the firm passes on to the client.

(d) The “largest fee” raised by a firm relates, in all cases, to the highest cumulative amount of fees raised to a particular client during the year rather than the largest single invoice raised.

(e) Subject to regulation 9(3)(g), any uninsured excess (that is to say, the amount of any claim which is borne by the firm before there is any payment by the insurer) in accordance with a firm’s PII and FGI shall be restricted to 2 per cent of the limit of indemnity in respect of each and every claim provided pursuant to the PII or, as the case may be, FGI or £20,000 per principal in respect of each and every claim, whichever amount is the lesser.

(f) Subject to regulation 9(3)(g), the annual limit of indemnity to be provided by a firm’s

FGI shall be not less than £50,000 in respect of each and every claim.

(g) Persons carrying on public practice in a country other than a designated territory may, instead of complying with regulations 9(3)(a), 9(3)(e) and 9(3)(f), comply with the minimum requirements of a recognised national body or regulatory authority in that country in respect of the limit of indemnity on PII and FGI and in respect of uninsured excess.

Further guidance on the minimum levels is also available.