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Professional indemnity explained
A PI claim is usually a demand for compensation or redress against you; a complaint is an expression of dissatisfaction that may or may not involve one. Knowing which you have decides when to notify your insurer and protects your cover.
Part of: Professional indemnity insurance
In short
Under most PI policies a claim is a demand for compensation or redress, or an intimation that one will be made, and a circumstance is something that may give rise to a claim. A service complaint with no alleged loss may be neither, but a complaint that your error cost money is usually at least a notifiable circumstance. Ombudsman complaints, including to the Legal Ombudsman or the Financial Ombudsman Service, are often treated as claims. Late notification can reduce or defeat cover, depending on the wording, so if in doubt tell your broker.
Not every complaint is a claim, but many complaints need notifying anyway. Under most PI policies a claim is a written or oral demand for compensation or other redress, or an intimation that one will be made. A circumstance is something that may give rise to a claim. A client who is unhappy about service but wants nothing more than an apology may be neither. A client who says your error cost them money, asks for a refund to make up for a loss, or mentions solicitors has probably given you at least a notifiable circumstance, and possibly a claim.
If in doubt, tell your broker. Notifying something that never turns into a claim rarely does harm. Failing to notify something that does can leave you arguing with your insurer about cover. See notification vs claim.
| Term | Typical meaning (wordings vary) | Notification trigger |
|---|---|---|
| Claim | A demand for compensation or damages, or the intimation of an intention to seek them; some wordings include the start of legal or ombudsman proceedings | Usually immediately or within a stated number of days |
| Circumstance | An incident, complaint or fact that could reasonably give rise to a claim | During the policy period, usually as soon as you become aware |
| Complaint with no demand | Dissatisfaction about service, delay or communication, with no allegation of loss | May be a circumstance if it suggests an error that could cause loss |
Notifying a circumstance properly generally attaches any later claim to the policy year in which you notified it, which matters on a claims made policy. Policies often require specific details, so read what to include in a circumstance notification and blanket vs specific notification.
Some complaints go to an ombudsman rather than a court. Whether your PI policy responds depends on its wording.
Many PI wordings for regulated firms extend to ombudsman awards for compensation, but refunds or reductions of your own fees are commonly excluded, and some wordings only respond once the complaint becomes a demand for compensation. Check your wording, and the legal complaints statistics for context on volumes.
The consequences of notifying late depend on how the condition is drafted. If notification is a condition precedent, a late notice may allow the insurer to decline the claim. If it is an ordinary condition, the insurer may only be able to recover the extra cost caused by the delay. See notification as a condition precedent and consequences of late notification.
The Insurance Act 2015 changed several insurer remedies, including through section 11 for terms that tend to reduce the risk of particular kinds of loss. Notification conditions do not usually reduce the risk of a loss happening, so it should not be assumed that the Act softens a late notification problem. Treat your policy wording as the rule. For more, see the Insurance Act 2015 and PI claims.
These examples are illustrative and not based on real cases.
Example 1: the service complaint. A client complains that an accountant was slow to return calls. No error is alleged and no loss mentioned. This is probably not a claim or circumstance, but keep a note in case it develops.
Example 2: the refund request. A client says a solicitor's delay caused them to miss a property purchase and asks for fees back. The mention of a lost purchase suggests a potential loss, so this is likely a circumstance at least, and perhaps a claim depending on the wording.
Example 3: the ombudsman referral. A financial adviser's client refers a complaint to the Financial Ombudsman Service about unsuitable advice and asks for compensation. This is very likely notifiable as a claim under the adviser's PI wording.
If a complaint escalates into a formal letter, read what to do after a letter of claim and our guide to apologising without voiding PI. To review your cover, see professional indemnity insurance.
Apex arranges professional indemnity insurance and helps clients notify claims and circumstances; a broker reads every enquiry.
Not automatically. Under most PI wordings, a claim involves a demand for compensation or redress, or an intimation that one will be made. A complaint about service with no allegation of loss may be neither a claim nor a circumstance. A complaint alleging an error that cost money is usually at least a notifiable circumstance. Check the definitions in your policy.
If the complaint suggests your work may have caused a loss, usually yes. Notifying a circumstance protects you if a claim follows, generally attaching it to the policy year you notified in. Notifying something that never becomes a claim rarely causes harm, while failing to notify can create a coverage dispute. Your broker can help decide.
Often, for compensation elements, subject to the policy terms. Legal Ombudsman compensation awards are capped at a total of £50,000, while fee refunds and reductions are not capped and are commonly excluded from PI. Solicitors should check their wording and the SRA minimum terms with their broker.
It depends on the policy wording. If notification is a condition precedent to cover, the insurer may be able to decline the claim. If it is not, the insurer may reduce the payment to reflect any prejudice the delay caused. Do not assume the Insurance Act 2015 will help with late notification.
Under many PI wordings for financial advisers, a complaint to the Financial Ombudsman Service seeking compensation is treated as a claim. The FOS award limit is £455,000 for complaints referred on or after 1 April 2026 about acts on or after 1 April 2019. Check your policy definitions and limits.
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Get a PI quote Request a callbackApex 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.
