Out of all of the professional sectors across England and Wales, law firms and their solicitors have been named on the majority of professional indemnity (PI) claims since 2020.

According to a new report by law firm CMS, since January 2020, 792 professional indemnity claims were filed to the High Court – 476 targeted solicitors or legal firms.

Despite the volume of claims remaining “fairly stable”, the report noted an increase in the number of claims being launched by people representing themselves.

These professional negligence claims involve allegations of breach of contract, negligence, breach of fiduciary duty and breach of trust. The banking and finance sector also featured heavily, mostly involving allegations of negligent advice or mismanagement of financial transactions.

Expensive insurance policies

Scarlett West, a partner in the insurance team at CMS, and one of the authors of the report noted: “Solicitors’ firms are facing higher PI insurance premiums and costs associated with regulatory compliance and increasing pressure to take on high work volumes to remain competitive”.

In order to be a regulated law firm or a practising solicitor, there must be a professional indemnity insurance (PII) policy in place, as set out in the rule book by the legal regulator, the Solicitors Regulations Authority (SRA).

But the price of these policies are far from cheap.

A report by the SRA last year detailed that PII premiums paid by law firms were typically between three per cent and nine per cent of annual turnover, with a median value of five per cent.

So if a law firm generated over £1m in turnover, its PI insurance policy is likely to be about £50,000.

Ed Anderson, partner at Browne Jacobson, told City AM: “Insurers continue to view solicitors as a more expensive risk and they continue to pay higher proportionate premiums than any other profession.”

As reported last July, accountancy firm Hazlewoods found that 65 law firms had to close down in 2019/2020 as a result of difficulties in obtaining coverage, but that number dropped to 34 for 2022/23 as premiums fell in October 2023.

Broker Howden reported last year an improving outlook for those renewing their solicitors’ PII.