PI insurance when taking on your first corporate client

A step-by-step read on how professional indemnity policies interact with corporate and public-sector procurement clauses, and how to close the gap without breaking your premium or your goodwill with your insurer.

Reading the client-contract PI clauses

The insurance schedule inside a corporate or public-sector contract is often only a page or two, but every line matters. Read it against your existing policy schedule side by side before you sign. Look first for the required limit of indemnity and note whether it is drafted on a per-claim basis, an aggregate basis, or both. A contract that specifies "£5 million each and every claim" reads quite differently from one that specifies "£5 million in the aggregate", and your existing wording may follow either convention.

Check the definition of insured activities. If your appointment covers advice, design and site attendance but the contract only refers to "professional services", the mapping needs to be clear enough that a future claim cannot fall between definitions. Look for period-of-cover language too. Many contracts require cover to be maintained for six or twelve years after completion, which is a run-off obligation your current policy may not fund.

Where the contract falls under public-sector rules, The Public Contracts Regulations 2015 shape both the specification and the evidencing process. Awarding authorities are entitled to require proof of insurance appropriate to the contract, and the wording is often standardised across a framework. Flag any clauses that require you to give notice of cancellation or of any material change to the client — those cut across your duty to your insurer, and both sides need to be reconciled before you sign.

Additional-insured extensions — what they do and don't do

A corporate client will often ask to be named as an additional insured, or as a joint insured, on your professional indemnity policy. The mechanics are widely misunderstood, so it helps to be precise. An additional-insured extension typically brings the client within the scope of your policy for claims arising out of your work for them. It does not turn your insurer into the client's insurer for their own operations, and it does not make your policy respond to the client's own negligence.

The extension can matter in practical terms. It gives the client a direct route to the policy if you become insolvent, alongside the statutory route provided by the Third Parties (Rights against Insurers) Act 2010. It can also give them standing to enforce policy benefits, which the Contracts (Rights of Third Parties) Act 1999 would otherwise have to reach through a specific carve-out.

Insurers will not extend the policy without knowing who the additional insured is and what they do. Expect an endorsement, sometimes an additional premium, and typically a cross-liability clause that treats the two insureds separately for claim purposes. What insurers usually will not agree to is a general waiver of policy conditions in favour of the client. Non-disclosure, late notification and fraud provisions stay in force, because they are the discipline the policy relies on.

Aggregate limit step-up

The most common gap between what a firm currently holds and what a corporate contract demands is aggregate capacity. A small professional firm may carry a £2 million aggregate limit, which is fine for its historic book but too thin the moment a public-sector contract asks for £5 million or £10 million aggregate. There are two routes to close the gap. You can step up your existing policy to the required aggregate, or you can arrange an excess-of-loss layer sitting above your primary limit with the same or a different insurer.

A step-up on the primary policy is cleaner administratively and often preferred by procurement teams. It typically requires updated underwriting information and, under the fair-presentation duty in the Insurance Act 2015, any material variation to the risk needs to be disclosed to the insurer in a manner that is clear and accessible. A doubling of the aggregate limit will usually be treated as a material variation, so this is not a rubber-stamp exercise.

An excess layer is useful where your existing insurer will not go higher, or where the pricing at higher limits becomes uneconomic on a single policy. Excess wordings need to sit correctly on the primary and follow the same claims-notification triggers. Where the layers are placed with different insurers, alignment of policy period, retroactive date and aggregation language is critical, and this is a common cause of coverage disputes if it is not handled at inception.

Wording alignment with client procurement

Public-sector frameworks, and many large corporate procurement teams, use standard insurance schedules that have been drafted in-house by legal advisers who have never seen the specific PI market. A contract may require cover on a wide-form basis, may prohibit certain exclusions, or may ask for a "manuscript" endorsement to reflect a particular obligation. Your policy needs to be compared to the schedule clause by clause, and the differences flagged in writing before you sign.

Common alignment points include the definition of professional services, the treatment of subcontractors, cover for breach of confidence and misuse of data, cover for liability assumed under contract, and any territorial limitation. If the contract says "worldwide including USA/Canada" and your policy excludes those territories, that gap needs to close before commencement. If the contract requires cover "on terms no less favourable than those currently in force", you and the client both need to agree what "no less favourable" means, so a future renewal does not put you in inadvertent breach.

Under the Unfair Contract Terms Act 1977, some business-to-business exclusion or limitation clauses are subject to a reasonableness test, which is worth knowing when a procurement team refuses to soften a clause. If any element of your service reaches a consumer, the Consumer Rights Act 2015 tightens the position further and can override certain contractual limitations. These are not routine PI issues, but they shape how far a client can insist on wording that your insurer will not follow.

Waiver of subrogation and hold-harmless clauses

Two clauses reliably cause the most friction with PI insurers. The first is a waiver of subrogation, which asks your insurer to give up its right to recover from the client after paying a claim on your behalf. The second is a hold-harmless or wide-form indemnity, in which you agree to compensate the client for losses that may include the client's own negligent acts.

Insurers push back on waivers because subrogation is central to how they price risk. Some will consider a limited waiver in favour of a named client, for the specific contract, and for as long as that contract remains in force. A blanket waiver signed without consent will typically prejudice cover under the general co-operation and recoveries conditions of the policy, so agreement in writing is essential.

Hold-harmless clauses are more delicate. PI policies typically follow legal liability for the insured's own negligent acts, errors and omissions. They do not follow contractual assumption of the client's liabilities. If a hold-harmless clause is drafted so widely that it captures the client's own faults, the excess exposure sits with you rather than with the insurer. In practice, the sensible fix is to narrow the indemnity to matters caused by or arising out of your acts, omissions or default, which is a formulation most procurement teams accept once the reason is explained.

Negotiating with your insurer to meet client requirements

The strongest positions come from asking early and asking with information. Send your insurer the draft contract and the insurance schedule as soon as you have them, ideally with a covering summary that highlights the specific asks — limit, aggregate, additional-insured status, waiver, run-off. Insurers respond faster and more constructively when they can see the entire request in one place, rather than in a series of piecemeal emails.

Under ICOBS 4.4 your broker is required to disclose the basis on which they are remunerated for arranging cover, including any commission received on additional premium generated by mid-term endorsements or excess layers. That transparency helps keep the negotiation clean and lets you compare the total cost of the step-up against the value of the new contract.

Where the primary insurer cannot or will not meet the required limit, the market has several ways to bridge the gap: a specific-contract endorsement that raises the aggregate for that project only, a top-up policy for the duration of the engagement, or a separate project-specific PI policy alongside your practice cover. Each has cost and administrative implications, and each interacts differently with your renewal, so the choice needs to be modelled against your book as a whole rather than in isolation.

What to keep on file for the client's auditor

Once cover is in place, the paperwork trail matters. Keep a broker certificate that confirms limits, aggregation basis, retroactive date, key extensions and the period of insurance. Keep the endorsement that names the client as additional insured, or the wording that waives subrogation, whichever applies. Keep a copy of the fair-presentation submission you made to the insurer, and a note of any material changes you disclosed. Keep the correspondence in which your insurer confirmed the specific contract clauses were acceptable.

Public-sector auditors, and internal audit teams inside larger corporates, will often ask for evidence at renewal. Being able to reproduce the file in five minutes rather than five days is a small operational advantage that lasts the length of the contract.

Common pitfalls and red flags

Frequently asked questions

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