Client insolvency · PII
Your client has gone into administration — what it means for your PI position
Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Published 14 July 2026
When a client company enters administration or liquidation, the professional advisers who worked with them can find themselves facing claims from an unexpected quarter. This page maps how UK PI responds when the client is insolvent, who can bring claims, and what firms should do.
Who can pursue you after client insolvency
- The administrator or liquidator acting on behalf of the insolvent company — typically the most active claimant.
- Individual creditors in specific circumstances (personal liability of directors, personal guarantees).
- Shareholders pursuing derivative claims.
- Regulator or professional body where the insolvent company was regulated.
- The tax authority where tax positions are disputed.
Common claim types in client-insolvency scenarios
- Advisory error causing the insolvency. Adviser's work directly contributed to the company's failure.
- Missed warning signs. Auditor, accountant or financial adviser failed to identify the deteriorating position.
- Wrongful trading advice. Adviser assisted with continued trading despite insolvency indicators.
- Transaction-at-undervalue claims. Pre-insolvency transactions structured on the adviser's advice being unwound.
- Preference-payment claims. Pre-insolvency payments alleged to have preferred certain creditors.
- Tax structuring undone. Pre-insolvency tax planning being disallowed post-insolvency.
How UK PI responds
- Standard PI covers civil liability claims from administrators, liquidators, receivers, individual claimants and creditors.
- Defence-cost cover typically responds fully — insolvency claims often generate substantial defence.
- Aggregation may apply where multiple related claims arise (advisor to a company later insolvent, multiple creditors involved).
- Regulatory investigation cover applies where a body like the FRC, ICAEW-DPB or FCA engages.
- Fraudulent-trading and wilful-misconduct exclusions typically apply — but civil-liability from negligence is covered.
The claims process from insolvent-client perspective
- Administrator or liquidator engages professional advisers on behalf of the insolvent estate.
- Preliminary letter of claim to the adviser identifying alleged errors.
- Adviser notifies their PI insurer.
- PI insurer instructs defence solicitors.
- Formal proceedings issued if not resolved.
- Sometimes settled through mediation; sometimes tribunal or court.
Timing considerations
- Claims can arise years after the underlying work. Six-year limitation from professional negligence usually applies, sometimes with discoverability arguments extending further.
- Insolvency-triggered claims often surface 6-18 months after appointment of the administrator.
- Retro-date on current PI must cover the historic work.
- Firms with material exposure to potentially-insolvent client sectors should size cover accordingly.
Practical steps at client insolvency
- Preserve records — correspondence, file notes, drafts, meeting minutes.
- Notify your PI broker preemptively if you did material work for the insolvent client — this is a notifiable circumstance under most wordings.
- Cooperate with legitimate administrator inquiries within your confidentiality obligations.
- Do not communicate directly about the underlying advice without insurer awareness — risks admissions.
- Engage a specialist broker if the exposure is material.
Frequently asked
Can a liquidator sue me for professional work I did for the client company?
Yes. Administrators and liquidators routinely pursue advisers whose work is alleged to have contributed to the company's failure or to have generated recoverable claims. Standard UK PI responds to these claims.
What is a transaction-at-undervalue claim?
Under the Insolvency Act 1986, transactions entered by the company before insolvency that transferred assets at less than fair value can be unwound. Where the adviser structured the transaction, the administrator may pursue the adviser as well as the counterparties.
Does my PI cover me if a former client goes into administration years after I did the work?
Yes typically, provided PI cover was in place when the claim is made. PI is claims-made — the current policy responds to a current claim, not the policy from the work-year. Retro-date on the current policy must cover the historic work.
Am I liable if I told the directors to continue trading and the company went insolvent anyway?
Depends on the specifics. Wrongful trading and misfeasance under the Insolvency Act carry personal exposure for directors, and advisers who advised on the continued-trading position may face civil claims. PI covers civil liability.
What if I did tax advisory work and the structure is being unwound in the insolvency?
Common scenario. Where the adviser's tax structuring is challenged post-insolvency, the client (via administrator) or the tax authority may seek recovery. PI covers civil liability from the adviser's work.
Do I need to notify my PI insurer preemptively when a client goes into administration?
Prudent yes, particularly for material clients. This is typically a notifiable circumstance under standard PI wordings. Notification protects the firm even if no claim ultimately arises.
How much cover do I need if my client base includes distressed businesses?
Materially more than for a stable client base. Insolvency-triggered claims often generate high defence costs and settlements. Discuss with specialist broker — layered programmes common for firms with material distressed-sector exposure.
Will my PI wordings differ because I work with insolvent clients?
Some insurers restrict or sub-limit cover for insolvency-adjacent work (advisory to companies subsequently entering insolvency). Discuss at renewal. Specialist wordings exist for firms with material insolvency-sector exposure.