Practice M&A: professional indemnity, run-off and deal cover
Why insurance decides more of a practice deal than people expect
Professional indemnity is written on a claims-made basis. The policy that responds is the one in force when the claim is made or the circumstance notified, not the one in force when the advice was given. That is why buying a professional practice is different from buying a trading company: you are not only buying the fee income and the client list, you are potentially inheriting every piece of advice the seller has ever given.
Deals go wrong when this is treated as an administrative item for completion week. By then the seller has usually stopped thinking about insurance, the buyer’s broker has not been told the deal exists, and the run-off decision is being made against a completion deadline rather than on its merits. The insurance workstream on a practice deal should start when heads of terms are agreed.
Successor practice: the rule that decides who carries the past
“Successor practice” is a regulatory concept rather than an insurance one. Broadly, where a firm ceases and another firm takes over its work, clients, name or partners, the second firm can be treated as succeeding to the first. The consequence under most minimum-terms regimes is that the successor’s policy picks up liability for the predecessor’s past work as if it were its own — so the buyer’s insurer inherits the seller’s claims history whether or not the buyer priced for it.
The rules are regulator-specific and you must check the ones that apply to the firms in question. For solicitors in England and Wales, the SRA Indemnity Insurance Rules and the Minimum Terms and Conditions deal expressly with succession: where a ceased practice has a successor, there is an election between the ceased practice taking run-off cover and the ceased practice being covered as a prior practice under the successor’s policy. Other regulators — RICS for surveyors, ICAEW for chartered accountants, and the various built-environment bodies — each set their own requirements for run-off and for what happens on succession, and they are not identical. Do not assume a rule you have seen for one profession applies to another.
The practical point is the same across regimes. Somebody has to be on risk for the seller’s past work for as long as claims can still be brought. The deal should decide, in writing, who that is.
Run-off on acquisition: who buys it, who pays for it
Run-off cover keeps the seller’s claims-made policy open for claims made after the practice stops trading. On an acquisition it is the mechanism that stops the seller’s history landing on the buyer’s policy. The questions to settle are:
Is run-off actually available, and on what terms? Run-off is normally offered by the incumbent insurer, and the limit, excess and exclusions usually track the expiring policy. It is not a fresh underwriting exercise you can shop freely, so the answer needs to come from the seller’s existing insurer early.
How long must it run? Regulatory minimums vary by profession, and the commercially sensible period is often longer than the minimum because of how long negligence claims can take to surface. Our page on run-off insurance sets out the mechanics, and the run-off overview for 2026 covers the decision itself.
Who pays? Run-off is a cost of exit, so it usually sits with the seller economically, but it is frequently traded — deducted from consideration, shared, or funded by the buyer in exchange for a lower price. What matters is that it is priced before the price is agreed, not after.
What if run-off is not bought? Then the buyer’s policy is likely to be exposed to the seller’s past. The buyer’s insurer must be told, before completion, and will want the seller’s claims and circumstance history to underwrite it.
What the buyer’s insurer needs, and when
Buying a practice is a material change in the risk. Under the duty of fair presentation, the buyer has to disclose it — and disclose it properly, which means the seller’s activities, fee split, claims record and known circumstances, not just the fact that a deal is happening. Leaving it until renewal is a mistake: notify the insurer when the transaction becomes likely and confirm in writing how the acquired work will be treated.
Expect the underwriter to ask for the seller’s claims experience, a description of the acquired disciplines and contract types, and details of any known circumstances. If the acquired firm did work the buyer does not do — a different discipline, a different sector, a different contract profile — the buyer’s existing wording may not be designed for it. See managing PI cover through a merger for the sequencing, and buying a book of clients for the narrower asset-purchase case.
Known circumstances: the point that catches sellers
A claims-made policy responds to circumstances notified during the period. Anything the seller knows about and has not notified is, in most wordings, excluded from any later policy — including run-off and including the buyer’s. A proper sweep of the seller’s files for notifiable circumstances before completion protects both sides, and a notification made correctly in the expiring period attaches to that policy. Our note on the first thirty days of a notification covers what a valid notification looks like.
D&O and management liability on a professional-practice deal
Directors’ and officers’ cover answers a different question from PI. PI responds to claims arising from professional services; D&O responds to claims against individuals for the way the business was managed — including, on a transaction, allegations about the conduct of the sale itself. Where the target is a company, its D&O policy is also claims-made, and it typically ends up in the buyer’s hands after completion. Run-off D&O for the outgoing directors is a standard ask, and it should be raised alongside the PI run-off decision rather than after it. Management liability cover bundles D&O with related covers for smaller businesses.
Warranty and indemnity insurance: what it does and does not do
Warranty and indemnity insurance is transactional cover. It responds to a breach of the warranties given in the sale agreement, transferring the risk of an unknown warranty breach from the parties to an insurer. On a professional-practice deal it can be useful where a seller wants a clean exit and the buyer wants recourse. It is not a substitute for run-off, and it does not insure the underlying professional liability — it insures the truth of the statements made about it. Matters already known and disclosed in the disclosure letter are outside it, which is precisely why the known-circumstances sweep matters.
An insurance timetable for a practice deal
At heads of terms: confirm both firms’ regulators and what their rules say about succession and run-off. At due diligence: obtain both claims records, both policy schedules and wordings, both retroactive dates, and a schedule of notified and unnotified circumstances. Before signing: get an indicative run-off quotation from the seller’s insurer, and get the buyer’s insurer’s position in writing. At completion: bind whichever route has been chosen and record it in the agreement. After completion: rebuild the buyer’s submission for the enlarged practice ahead of its next renewal, because the fee split, discipline mix and claims history have all changed. Our programme structure guide and the succession page deal with what comes next.
Frequently asked questions
If we buy a practice, does our PI policy automatically cover its past work?
Not automatically, and not universally — it depends on the regulator’s rules, the wording of your policy and whether the seller buys run-off. Under several minimum-terms regimes a successor practice’s policy is expected to respond to the predecessor’s past work unless run-off is put in place, but you should never rely on that as a general rule without checking the rules that apply to both firms and telling your own insurer what you are buying.
Who should pay for the seller’s run-off cover?
There is no rule. Economically it is a cost of the seller leaving the market, so it commonly sits with the seller, but it is regularly negotiated into the consideration. The important thing is that a real quotation exists before the price is fixed, because run-off is a single premium for a multi-year period and it can be a material number.
Do we have to tell our insurer before completion?
Yes. An acquisition is a material change in the risk and the duty of fair presentation applies. Tell the insurer when the deal becomes likely, give them the target’s activities and claims history, and get their position confirmed in writing before you complete rather than at the next renewal.
Is warranty and indemnity insurance the same as run-off?
No. Run-off keeps a professional indemnity policy open for claims about past professional work. Warranty and indemnity insurance responds to a breach of the warranties in the sale agreement. They solve different problems and a deal can need both, or neither.
This page is general insurance information, not legal advice, and describes the position as at August 2026. Cover depends on the wording of the policy actually in force.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.