FCA authorised · FRN 724952 0117 325 0027Quote & buy →
Mid-market insurance
Business interruption insurance for law firms is cover for the fee income a practice loses, and the extra costs it incurs, after insured damage disrupts its work. Getting the basis and indemnity period wrong can leave a firm paying salaries with no income to meet them.
Part of: Commercial insurance
In short
Law firms usually insure business interruption on a fee income or gross revenue basis, because payroll keeps running after a loss and there is little cost of sales. The key decisions are the sum insured, which should reflect projected fees, and an indemnity period long enough to recover billing and client relationships. Check how WIP, lock-up, records reconstitution, denial of access and utilities are treated. A cyber attack with no physical damage usually falls under a cyber policy's BI section, not the property policy, so the two need to fit together.
For a law firm, business interruption (BI) insurance is the part of the office programme that pays for the fall in fee income, and the extra cost of keeping the practice running, after insured damage stops or slows the firm's work. It sits alongside the firm's solicitors PI insurance rather than overlapping it: PI responds to claims from clients, while BI responds to the firm's own lost income.
The question for a finance director or managing partner is not usually whether to buy it, but whether the basis, the sum insured and the indemnity period reflect how a fee-earning business actually loses money. A firm does not lose stock or production; it loses billable hours, delays billing, and sees lock-up stretch while fee earners regroup. A policy built for a manufacturer can fit that pattern badly.
The SRA Code of Conduct for Firms requires firms to "identify, monitor and manage all material risks" to the business (paragraph 2.5) and to monitor financial stability and viability (paragraph 2.4), as set out on the SRA Code of Conduct for Firms page. BI is not a regulatory requirement, but a prolonged loss of fee income is exactly the kind of material risk that paragraph has in mind.
Most professional offices insure on a gross revenue or fee income basis rather than gross profit. The difference matters, and our guide to gross profit vs gross revenue business interruption covers the arithmetic. In short:
| Point | Gross revenue (fee income) basis | Gross profit basis |
|---|---|---|
| What is insured | Fees the firm would have earned, less savings | Turnover less specified working expenses |
| Fit for law firms | Usually the natural fit, as there is little cost of sales | Can work, but the uninsured expenses list needs care |
| Main risk | Sum insured set from last year's fees, not projected fees | Salaries or contractor costs wrongly treated as variable |
| Average (underinsurance) | Commonly applies if the declared figure is too low | Commonly applies if the declared figure is too low |
Salaries are the trap. A firm's biggest cost is its people, and after a fire or flood those costs do not stop. If payroll is treated as an uninsured variable cost, the policy may pay far less than the firm expects. Many firms insure payroll in full within fee income, or with a separate payroll extension, subject to the policy terms.
A law firm loss rarely looks like a shop closing. Fee earners can often work remotely within days, so the loss tends to show up as reduced productivity, missed deadlines, delayed completions and slower billing. Points to check:
Disease and prevention of access wordings were tested in the FCA business interruption test case, decided by the Supreme Court on 15 January 2021 ([2021] UKSC 1). The lesson for firms is that the precise wording of each extension decides whether a non-damage event is covered at all.
For most law firms, the likeliest cause of a serious interruption is not fire but a cyber incident: ransomware on the case management system, a compromised email platform, or an outage at a cloud provider. A property BI policy is usually triggered by physical damage to property, so a cyber event with no physical damage commonly falls outside it. That gap is normally filled by a cyber policy with its own BI section, waiting period and indemnity period. Our page on the cyber, PI and BI overlap after a cyber attack sets out how the three policies interact.
A cyber incident involving client data may also need reporting to the Information Commission (formerly the ICO). Its personal data breach guidance says a reportable breach must be notified without undue delay and not later than 72 hours after becoming aware of it. Breach response costs usually sit in the cyber policy, not the BI section.
Firms with offices outside the UK should check whether overseas premises are named in the property schedule, whether local law requires a locally issued policy, and how fees earned abroad are declared. See insurance for UK firms with overseas offices for the wider picture.
These examples are illustrative only and do not describe any real firm or claim.
Water from an upper floor damages the firm's server room and paper deeds store. Fee earners work from home within a week, but billing on a major matter slips four months while records are rebuilt. A fee income policy with a 24 month indemnity period and a records reconstitution extension is likely to respond better than a 12 month gross profit policy that excludes payroll.
An incident two streets away closes access to the office for nine days. There is no damage to the firm's premises. Whether there is cover depends entirely on the denial of access extension: its radius, any minimum closure period and its sub-limit.
The practice management system is encrypted and billing stops for three weeks. The property BI section is unlikely to respond because nothing was physically damaged. The cyber policy's BI section, subject to its waiting period, is where the claim would usually sit.
Our hub page on business interruption insurance has more on how BI claims are calculated. Apex arranges business interruption cover for professional offices; a broker reads every enquiry.
No. Solicitors PI insurance responds to claims by clients and third parties alleging a breach of professional duty. Loss of the firm's own fee income after a flood or fire falls under business interruption cover in the office or property policy, subject to its terms, so the two need to be arranged separately.
It depends on how long it would realistically take to restore fee income to its pre-loss level, not just to reopen the office. For many firms that includes finding premises, rebuilding records and recovering client relationships. Periods of 18 to 36 months are common for firms with one main office or long matters, but it is a firm by firm judgement.
Most law firms insure on a gross revenue or fee income basis because they have little cost of sales and their main cost, payroll, continues after a loss. A gross profit basis can work if uninsured working expenses are defined carefully. The right choice depends on the firm's cost structure and the policy wording.
Usually not under the property section, because most property BI is triggered by physical damage and a ransomware attack typically causes none. Interruption from a cyber event is normally covered, if at all, by the BI section of a cyber policy, which has its own waiting period, indemnity period and limits.
Only if those premises and the fee income they generate are included in the schedule and the territorial limits. Some countries require locally issued insurance, so overseas offices are sometimes covered by a local policy that sits under the UK programme. Check each location with your broker.
Send us your current schedules or renewal pack and we will review the whole programme and tell you plainly what to keep and what to change. No fee and no obligation. Or call 0117 325 0027.
Book a programme review Get a quoteApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
