Should I take out additional PII cover to act in a property purchase for an old friend?

An old friend wishes to instruct my firm to act in a £4 million property purchase. What level of professional indemnity insurance (PII) cover do I need?

If you do not routinely carry out conveyancing work at that level, the responsible action would be to refer the matter to a firm that does.

If you do not refer the matter on, you will be creating substantial difficulties for yourself when you come to renew your PII as this will:

• greatly increase the cost of premiums
• limit the number of insurers willing to consider providing cover

Under rule 3.1 of the SRA Indemnity Insurance Rules 2019, an authorised body must take out and maintain professional indemnity insurance that provides "adequate and appropriate" cover in respect of current or past practice, taking into account any alternative arrangements the body or its clients may take.

If you need cover above the compulsory level (known as ‘excess layer’ or ‘top-up’ cover), this cover is not subject to the requirement to purchase it from an SRA participating insurer.

This means that you can get excess layer cover from any insurer and on different terms and conditions to the minimum terms and conditions (MTC).

It’s important that you understand:

• what is and is not included in the excess layer cover
• the effect that this will have on any claims made

You’re not tied to purchasing excess layer cover at the same time that you renew your MTC PII.

You can buy it at any time when the need arises (for example, if you’re planning to take on additional work).

However, it’s not simply a matter of topping up cover for a single transaction or for a single indemnity year.

The ‘claims made’ nature of the PII system makes it important to maintain that level of cover while a claim can still be brought in relation to that work. To be protected, your firm may face higher premiums for several years.

Six years after the completion of work undertaken is usually the minimum amount of time that excess layer cover is kept in place. For some transactions, that period should be longer or in perpetuity.

For more information:

• read rules 2.1 and 3.1 of the SRA Indemnity Insurance Rules
• explore our range of PII courses, tailored for sole practitioners and small firms, medium and large firms, and supervisors
• check our practice note on professional indemnity insurance
• learn more about excess layer cover