How does a professional indemnity insurance claim work?

Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-05

PI insurance protects professionals against claims that their advice, designs or services were negligent, inaccurate or fell below a reasonable standard. Because most UK PI policies are written on a "claims made" basis, the way a claim unfolds is different from motor or property cover. This guide walks a first-timer through each stage.

Step 1: A circumstance or a claim arises

There are two triggers, and it matters which one you are dealing with:

• A claim is a demand made against you — a formal letter of claim, a solicitor's letter, or a client asserting you are liable for their loss.
• A circumstance is something that might become a claim but has not yet: a client complaint, a mistake you have discovered in your own work, or a project going wrong in a way that could later be blamed on you.

Under a claims-made policy, the cover that responds is the one in force when the claim is made or the circumstance is notified — not the policy that was live when you did the work. That is why continuity of cover matters, and why notifying circumstances early is so important.

Step 2: Notify your insurer — promptly and in writing

Your policy will require you to tell your insurer as soon as you become aware of a claim or a circumstance that may give rise to one. Do not wait to see whether the problem "goes away." Late or partial notification is one of the most common reasons cover is disputed.

Notifying a circumstance during the current policy period effectively "locks in" that policy to respond, even if the actual claim lands months or years later. This is a genuine protection, not an admission of fault — and a good broker will help you word the notification.

Two related points to understand before you ever have a claim:

• Do not admit liability or settle anything yourself. Most policies say that admitting fault, promising to fix the work for free, or agreeing a payment without the insurer's consent can prejudice your cover.
• Fair presentation matters. Under the Insurance Act 2015, you owe a duty to make a fair presentation of the risk when you take out or renew the policy. Answer proposal questions honestly and disclose known circumstances — a misrepresentation can affect how a later claim is treated.

If you are between policies or unsure whether cover applies, speak to your broker before responding to the client. Apex can help you notify correctly and protect your position.

Step 3: The insurer appoints solicitors and investigates

Once notified, the insurer takes control of the claim's handling. For anything beyond a minor matter they will usually instruct panel solicitors — law firms the insurer works with regularly and who specialise in professional negligence defence. You do not have to find or pay for them yourself; their fees fall within your policy.

The investigation stage typically involves:

• Reviewing your file, contracts, correspondence and the work in question.
• Assessing whether you were actually negligent, and whether that negligence caused the loss the client claims.
• Quantifying the client's alleged loss — often the most contested part.
• Sometimes instructing an independent expert to give an opinion on the standard of your work.

You will be expected to cooperate fully: provide documents, give your account of events and stay available. The policy requires this, and it is also in your interest — the defence is built on your evidence.

Step 4: Defend, or settle?

After investigation, the insurer and solicitors form a view. Broadly there are two routes, and the decision usually rests with the insurer under the policy terms.

Defending the claim

If the allegation looks weak — you were not negligent, or the loss was not caused by you — the insurer may fund a robust defence. Many disputes are resolved through pre-action correspondence, negotiation or mediation without ever reaching court. If it does proceed, the panel solicitors run the litigation on your behalf and the policy covers the defence costs.

Settling the claim

Often the commercially sensible outcome is a negotiated settlement, even where liability is arguable, because defending to trial is expensive and uncertain. The policy pays the agreed damages plus costs, above your excess. Settlement is not an admission that you did anything wrong — it is a business decision to close the matter.

Two features commonly shape this decision:

• The senior counsel clause. Many PI policies say the insurer cannot require you to contest a claim (nor you require them to settle) unless a King's Counsel advises that the matter should reasonably be defended. This protects both sides from an unreasonable stance.
• Defence costs and the limit. Check whether defence costs are paid in addition to your limit of indemnity or within it. "Costs in addition" preserves your full limit for damages; "costs inclusive" means legal fees erode it.

What you pay: the excess

Your policy carries an excess (sometimes called a deductible) — the first slice of each claim you bear yourself. Depending on the wording, the excess may apply to damages only, or to defence costs too. Everything above the excess, up to your limit of indemnity, is the insurer's responsibility. Illustrative limits are commonly offered as £1m, £2m or £5m, but the right figure depends on your contracts, your sector and any client requirements.

Circumstance vs claim: why the distinction matters

These two words drive how claims-made cover behaves, so it is worth being clear:

A circumstance is an early warning — you notify it to secure the current policy, and no money may ever change hands. A claim is the actual demand for compensation. Notifying a circumstance in good time can be the difference between a smooth claim and a coverage argument, because it fixes the responding policy before the situation escalates. When in doubt, notify.

Common questions

Will making a claim increase my premium?
It can. Insurers rate PI risk partly on your claims history, so a notified claim may affect your next renewal terms. That said, failing to notify a genuine circumstance is far riskier — it can leave you uninsured for the eventual claim. Notify properly and let your broker manage the renewal conversation.

What if my insurer refuses the claim or handles it poorly?
If you are an eligible complainant (broadly, smaller businesses and individuals), you can complain to the insurer and then, if unresolved, refer the matter to the Financial Ombudsman Service. Your broker can also press the insurer and help you understand whether the policy really does or does not respond.

Do I still need PI cover after I finish a piece of work?
Yes. Because cover is claims-made, a claim about work you did years ago is only met if you hold a live policy (or run-off cover) when that claim is made. Letting cover lapse can leave historic work unprotected — which is why professionals maintain PI continuously, and buy run-off when they cease trading.

The claim journey at a glance

• 1. Trigger — a claim is made against you, or you spot a circumstance.
• 2. Notify — tell your insurer promptly, in writing; admit nothing.
• 3. Investigate — panel solicitors review the file and assess liability and loss.
• 4. Decide — defend the allegation or negotiate a settlement.
• 5. Resolve — the policy pays damages and costs above your excess, up to your limit.

A PI claim can feel daunting the first time, but the structure is predictable and you are not navigating it alone. Your insurer and their solicitors do the heavy lifting; your job is to notify early, cooperate, and take advice before you respond to the client. Talk to Apex if you want a policy — or a plain-English explanation of your own.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for reading your policy wording.