Expert advice: at your service

Professional indemnity

Find the right insurer for you

The professional indemnity insurance market has accelerated recently and,
consequently, the number of PII providers has increased. Often, general
insurance brokers are offering PII without being able to provide the right kind
of advice.

But modern day accountants are problem solvers and business advisers with a
range of skills and proficiency in many business areas and need a provider that
understands the value and risk placed on the advice you give.

When looking for a PII broker, some simple questions can be asked:

• How many years have you been supplying professional indemnity insurance?

• How many clients do you currently service in my profession?

• Are you endorsed or appointed by any governing or regulatory body?

PII specialists will have direct access to the underwriter rating your risk.
This is vital in terms of the broker being able to negotiate effectively on your
behalf; that way the process is more fluid and information is transferred more

When seeking terms it is advisable to select a specialist to undertake their
market exercise in addition to their incumbent service provider, as non
specialists may simply flood the market with their proposals. Specialists will
know which underwriters to approach and invariably have exclusive relationships
with major underwriters, enhancing their negotiating capabilities.

Today’s specialist PII brokers cannot be judged simply on the insurance
services they offer, but also on their ability to effectively handle claims.
They should effectively manage the entire process, ensuring you are fully
informed throughout.

When claims are made against you, your reputation is at stake.

Your broker should understand this and advise you of measures that can be
deployed, ensuring an acceptable resolution to all parties.

Ultimately, the relationship between you and your broker is integral to
getting the most from your PII. Specialists will present your firm’s case to the
markets that will quote you, and the quality of the presentation your broker
makes to market is critical.

A specialist will have developed the appropriate proposal form and know the
right questions to ask of you, so that the most relevant cover is offered –
therefore a fair and accurate premium is quoted.

SBJ Professional is the appointed broker to ICAEW members for professional
indemnity insurance.

Professional indemnity claims are thankfully rare, a fact supported by
relatively low premiums. With care, common sense and the adoption of good
practice the incidence can be further reduced and such an achievement should
obviously benefit all – you, the client and the insurers.

Avoiding a claim

Lack of time, being too closely involved with the detail and failure to
communicate effectively are the most common reasons for claims arising.

But what can be done about these issues? Follow a strictly common sense
approach. Before you accept a job, start by considering it fully:

• Do you have enough time to do your part of the work without being stressed?

• Have you access to enough, appropriately competent resource, to do the rest
of the work?

• Are you up-to-speed on the technical front?

• What about the client? Will you find that time and commercial pressure come
into play?

• Will information be forthcoming?

• Who else may be relying on this exercise? Perhaps, third parties who might
claim that you owed a due of care to them.

Engagement terms need to be understood and agreed between the firm and the
client. The engagement letter represents the written contract between the client
and the firm and provides an opportunity to clarify any aspect of the work that
might form the basis of misunderstanding – a common source of professional
liability claims. I remain surprised by how often this fundamental step is
missed where the service in question is not an audit.

You may wish to consider limiting your exposure to professional indemnity
claims by including appropriate terms within the engagement letter. This is
possible for most professional services though audit remains legally barred
until the provisions in the Companies Act 2006 are implemented.

Practitioners sometimes find themselves sued by third parties who assert that
the firm owed them a non-contractual duty of care, such as a bank when making a
lending decision based on the client’s audited financial statements. When the
firm knows that a third party will have access to the output of its work and
will place reliance on it, then it should consider including an effective

Take a critical look at the work before it goes out of the door.

• Have all relevant professional standards have been applied? Is the service
presented in an appropriate form?

• Did anything happen during the course of the work that might provide
grounds for someone to claim an alteration in the basis on which the work was

• Are related reports in an appropriate format and include appropriate
limitations and/or disclaimers?

• Have all aspects been subjected to a rigorous and objective review, ideally
by someone not involved in the work?

Many firms have a system of second partner review, to cover these issues, but
where firms do not have such resources, other safeguards need to be considered.
These could include putting the work to one side for some time after it has been
completed, to enable a fresh eye to be cast over, or employing an external
accountant for a ‘hot review’.

Handling a claim

Whenever a claim arises or is threatened make sure you follow the policy
terms precisely, or you run the risk of the claim being rejected. Notify your
insurer. If appropriate, do this through your broker. Make sure you have your
insurer’s consent before you respond to the claimant.

It is not uncommon for the insurer to want to keep the firm and the claimant
out of direct contact. To breach this may be considered by the insurer to
prejudice the position, and the last thing you want is a disagreement with your

A second tip is to maintain a contemporaneous log. No matter how good your
memory, these matters have a tendency to take longer to sort out than expected.
The sequence of events can be important and a log can provide clarity.

Next step must be to research the basis of the claim. Despite your certainty,
is there substance to it? As with car insurance never admit blame, but a
sensible conversation with your broker can sometimes help restrict the process
and may save you time, worry and heartache.

At this point in the process, it is common to feel out of the communication
loop. Things may be taking place, but the pace often seems slow at best.
Remember, while for you this is hopefully an exceptional case, this is everyday
business for those dealing with the claim.

Have patience, and when you are perhaps told that the insurers have settled,
hold back your frustration that they didn’t apparently fight the claim or build
on that point you identified during your research. In today’s market, pragmatism

Alan Taylor is director of practice member services at

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