What does 'adequate and appropriate' insurance mean for a freelance solicitor?

I'm thinking of becoming a freelance solicitor and understand that if I want to provide reserved legal services I need to have ‘adequate and appropriate’ professional indemnity insurance. Is there any guidance on what ‘adequate and appropriate’ means?

Freelance solicitors undertaking reserved legal services must obtain what the Solicitors Regulation Authority (SRA) has referred to as ‘adequate and appropriate’ professional indemnity insurance (PII) cover in respect of the services they provide.

Once the obligation has arisen, it applies to all the services provided by the freelancer whether reserved or non-reserved.

Although not compulsory for freelance solicitors who exclusively offer non-reserved legal services, it's likely to be in the best interests of solicitors and clients to obtain insurance that is appropriate and sufficient to protect them and their personal assets. If you do not have insurance, you will be personally liable.

What is an ‘adequate and appropriate’ level and scope of cover will potentially differ from one solicitor to the next, and will depend on various factors:

• evidence that you've made a reasonable and rational assessment of the appropriate level and wider terms and conditions of PII cover required
• the client profile
• the number, type, value and frequency of client engagements
• an assessment of the probable maximum loss for each type of work you undertake
• your claims history
• the need for ‘top up’ insurance for a particular matter or specific risk
• the information provided to clients on the limitations of cover, the contrast with other legal advisers, and why and how the insurance offered meets the client’s needs

The SRA produced guidance on what constitutes ‘adequate and appropriate’ insurance, and you should satisfy yourself that your arrangements meet the required standard.

It has also produced two case studies, illustrating how the SRA expects such insurance to work in practice. 

Different levels of insurance are likely to be needed for different practice areas.

Freelance solicitors should ask themselves:

1. How will you record your decision on the factors outlined above?
2. Given your client base, how often should you review your insurance cover?
3. How will you explain the insurance matters to clients so you can provide evidence that the client made an informed choice?
4. Are you putting your own interests in wanting the client’s instructions/work ahead of the client’s best interests or needs?

You should also inform your insurer if you intend to see clients at home and work from home on a regular basis.

The SRA also requires freelance solicitors to inform clients about insurance arrangements. Read section 4 of the SRA transparency rules

For more information, see our practice note on freelance solicitors.