Category: Specialist underwriting · Reviewed by Jake Leat, Associate Director · Last reviewed May 2026
A six-partner consulting practice in the South East notified a complex professional negligence claim with reserved quantum of £5m and an estimated 18-month litigation timeline. The firm carried a £5m primary limit, which had been chosen carefully against the reserved figure. Eighteen months in, defence costs had reached £1.8m. The reserved damages figure was largely unchanged. The firm’s finance director, reviewing the position with the broker, was working through a calculation he had not expected to have to make: the policy was written costs-inclusive, defence costs eroded the limit pound for pound, and the effective indemnity available for damages had reduced from £5m to roughly £3.2m. The position was inside the wording — defence costs erosion had been agreed at placement — but the practical consequence had not been modelled. This article sets out twelve PI policy clauses where the language matters more than the headline metrics, and where firms most commonly find that the policy behaves differently from the way the renewal slip read.
Since the Insurance Act 2015 came into force, the duty of fair presentation has replaced the duty of disclosure for non-consumer insurance. Insurer remedies for breach are now graduated: avoidance is available only for deliberate or reckless breach; proportionate remedies apply where the breach was neither deliberate nor reckless.
The clause variation that matters is whether the policy goes further and waives insurer remedies short of fraud. An “innocent non-disclosure” or “innocent breach of duty of fair presentation” clause provides that, where the breach was neither deliberate nor reckless and not the fault of the partners or members signing the proposal, the insurer will not exercise its Insurance Act remedies. This goes beyond the statutory position and protects the firm where information was withheld by an employee or junior partner without senior knowledge. Wordings vary substantially: some require the breach to be entirely innocent, others permit “honest mistake”, others extend the waiver only to specified categories of information.
Some PI policies, particularly mid-tier accountant, surveyor and consultant wordings, contain an exclusion or restriction for claims against sole traders or single-principal practices. The clause may be drafted as an exclusion for “the personal acts of a sole principal”, or as a restriction that requires sign-off of work above a certain value by a second principal — impossible to satisfy in a single-partner firm.
For sole practitioners and very small firms, this clause needs explicit review at every renewal. Insurers will sometimes accept a side endorsement removing the restriction; some will not write the firm at all. The clause is most commonly missed where a multi-partner firm has reduced to a single principal during the policy period.
Libel, slander and other defamation exposures are sometimes included within the definition of “professional services” and sometimes excluded. The clause variation that matters is whether the cover is granted as part of the core indemnity (responding within the primary limit) or as a sublimited extension (responding only up to a smaller sublimit). For professions with significant publication exposure — auditors, valuers, reporting accountants, surveyors providing public-facing reports — the sublimit treatment can leave material exposure uninsured.
The clause is also sometimes excluded entirely on the basis that defamation should sit in a separate media liability policy. For most firms this is unsatisfactory because professional defamation exposures typically arise in the course of providing professional services.
Cover for the dishonesty of employees — historically called “fidelity” cover within a PI policy — is now a standard element of most UK PI wordings. The clause has several variables.
First, whether all employees are covered or only those engaged in delivering professional services. Second, whether the cover sits within the primary limit or as a separate sublimit. Third, whether the cover is granted on a claims-made basis (responding to claims notified during the policy period regardless of when the dishonest act occurred) or on a discovery basis (responding to dishonesty discovered during the policy period). The trigger basis carries significant practical consequences where a dishonest scheme is discovered after a change of insurer.
The “innocent insured” provision is critical: it ensures that, where a dishonest employee or partner brings the firm into breach of conditions, the firm’s clean employees and partners are not deprived of cover. Wordings vary on how broadly this is granted.
Cover for dishonesty of employees rarely extends to dishonesty of senior or controlling partners. The carve-out is standard but the definition of “controlling partner” varies materially.
Some wordings carve out dishonesty by “any partner”. Some narrow this to “a senior partner” without further definition. Others define “controlling partner” by reference to equity participation (for example, partners holding more than a stated percentage of equity), management role (for example, members of the executive committee) or signatory authority. The breadth of the carve-out determines how far down the partnership hierarchy a dishonesty act can occur before innocent-insured protection is lost.
For partnerships with a flat senior structure — many small accountant and surveyor firms — the distinction between “senior” and “controlling” partner may catch every equity partner. For larger firms with a distinct executive structure, narrower drafting may protect non-management partners.
Where the firm engages in joint ventures or consortium arrangements — common in construction-side consultancies and increasingly common in legal and tax advisory — cover for those arrangements is not automatic. Some wordings include JV and consortium activity within the definition of “professional services”. Others require the JV or consortium to be specifically endorsed onto the policy.
The clause matters because, where the firm has provided services through a JV vehicle and the JV is later sued, the firm’s PI policy may respond only if the JV vehicle is a named insured or if the cover extends to “professional services provided through any joint venture in which the insured participates”. Coverage gaps in this area are surprisingly common.
Firms that subcontract part of their work to third parties — surveyors using specialist measurement contractors, accountants using outsourced tax preparation, consultants using freelance project resource — face a coverage question about vicarious liability for subcontracted work.
The clause variation is twofold. First, whether the firm’s PI policy covers its vicarious liability for the negligence of subcontractors. Most modern UK PI wordings do, but on conditions. Second, whether the subcontractor itself is a co-insured under the policy or merely a third party whose acts the firm is vicariously liable for. The distinction matters because, if the subcontractor is a co-insured, the insurer has rights against the subcontractor’s own insurance; if the subcontractor is not a co-insured, the subcontractor’s separate insurance may not be triggered by the firm’s claim.
This is the clause that most frequently produces the gap between the renewal-slip reading of the policy and the cash position when a complex claim runs to trial.
A costs-inclusive policy treats defence costs as part of the indemnity limit. A £5m limit means £5m total, of which any spend on legal defence reduces what remains for damages and settlement. A costs-in-addition policy treats defence costs as additional to the limit, so the £5m is reserved entirely for damages.
UK PI for most professional services firms is written costs-inclusive. Costs-in-addition is more typical of corporate D&O cover and certain higher-value PI placements. The distinction is most consequential for firms with long-tail litigation exposure: a six-figure defence spend on a single complex claim can substantially reduce the effective indemnity. Where the firm is choosing limits with a specific reserved figure in mind, the choice of costs basis is as material as the choice of limit.
Where one partner withholds information at proposal, the question arises whether that breach contaminates the cover for innocent partners. Severability provisions answer that question.
A robust innocent partner severability clause provides that, in determining whether the policy was avoided or remedies are available for non-disclosure, the knowledge of any one partner is not imputed to the others. The clean partners retain cover.
Severability provisions vary in scope. Some are limited to non-disclosure. Some extend to all conditions of the policy including notification, conduct of claims, and warranties. Some carve out specific exclusions from severability — for example, fraud, where the partnership as a whole loses cover regardless of which partner committed the fraud. For multi-partner firms, severability language matters at every renewal.
The settlement clause governs the insurer’s right to settle claims and the firm’s right to refuse settlement. The traditional “QC clause” — sometimes called a “senior counsel clause” — is the firm’s protection.
The mechanism is typically that, where the insurer wishes to settle but the firm wishes to defend, or vice versa, the dispute is referred to a senior counsel jointly nominated by the parties. The counsel’s opinion on whether the claim should be settled on the insurer’s proposed terms is binding. The clause prevents the insurer from forcing a commercially unacceptable settlement on the firm (settlement frequently carries reputational consequences for professionals) and prevents the firm from running unjustified defence costs at the insurer’s expense.
Wording variations include whether the counsel must be a King’s Counsel or merely a barrister of stated experience, whether the test is “more likely than not” to succeed or some other threshold, and who pays the cost of the opinion. The QC clause is one of the most negotiated provisions in larger PI placements.
Claims between current and former partners — partnership disputes, claims by retired partners against the firm, claims by the firm against former partners — sit awkwardly within PI cover. Most UK PI wordings exclude “insured versus insured” claims by definition.
The clause variations matter for firms with active partnership rotation, retirement programmes or any history of partner disputes. Some wordings except claims by former partners after a stated period (typically the limitation period). Some except claims arising from acts in a former partner’s capacity as a client of the firm. Some grant a sublimited extension for partner-versus-partner claims.
For firms structured as LLPs with a defined membership, the question of who is “the insured” needs particular attention. Members and former members may have different positions under the wording.
The intersection between professional indemnity and cyber liability has become materially more important since the increase in supply-chain attack patterns from 2023 onwards. PI policies vary in how they treat cyber-related professional liability.
Some wordings are silent on cyber — they neither include nor exclude cyber-related professional negligence. Silent cyber leaves the firm relying on general policy construction to argue that, for example, a data breach caused by negligent IT advice is covered as a professional service. The position is unclear and contested.
Some wordings now contain explicit cyber exclusions, removing cover for any claim “directly or indirectly caused by, contributed to by, or arising out of” a cyber event. These exclusions are broad and can extend to claims that the firm would otherwise expect to be covered as professional negligence.
Some wordings include explicit cyber affirmation — confirming that cyber-related professional negligence is covered up to specified sublimits, with a separate retention. The affirmation route is preferable for most professional services firms because it removes the construction argument, although the sublimits may not be sufficient for high-cyber-exposure professions and dedicated cyber cover may still be needed.
A 13th clause worth flagging in any wording review is mitigation costs cover — the costs of taking action to prevent or reduce a potential claim. Some wordings include mitigation costs as a positive extension; some exclude pre-claim costs altogether; some grant the cover only with insurer consent in advance. Where mitigation costs are excluded, firms may be left funding the work that would have prevented a much larger eventual claim.
Costs-inclusive means defence costs erode the limit of indemnity — a £5m limit covers both damages and defence spend. Costs-in-addition means defence costs sit on top of the limit, so the full limit is reserved for damages. UK PI for most professional services firms is written costs-inclusive; the choice matters more for firms facing long-tail litigation.
The QC clause (sometimes called a senior counsel clause) governs disputes between the firm and the insurer about whether to settle a claim. Where the parties disagree, a senior barrister jointly nominated by them gives a binding opinion. The clause prevents the insurer from forcing an unwanted settlement and prevents the firm from running uncommercial defence at the insurer’s expense.
The innocent insured provision protects clean partners and employees where another partner or employee has brought the firm into breach of policy conditions — for example by non-disclosure, late notification or dishonesty. The breadth varies by wording; robust severability provisions extend the protection to all policy conditions, narrower ones limit it to specific situations.
Dishonesty cover typically extends to employees and may extend to partners other than senior or controlling partners. The carve-out for senior or controlling partners is standard. The definition of “controlling partner” varies by wording, and may catch every equity partner in flat partnerships or only management partners in firms with a defined executive structure.
Most modern UK PI wordings cover the firm’s vicarious liability for negligence by subcontractors. Whether the subcontractor itself is a co-insured under the firm’s policy is a separate question and varies by wording. The distinction matters for the interplay with the subcontractor’s own insurance.
Severability means that the knowledge or conduct of one partner is not automatically imputed to the others when assessing insurer remedies for non-disclosure, late notification or breach. Innocent partners retain cover. Severability provisions vary in scope; the strongest extend across all policy conditions and exclude only fraud.
PI wordings treat cyber in three ways: silent (neither including nor excluding), explicit exclusion, or explicit affirmation up to a sublimit. Silent cyber leaves the position unclear. Explicit exclusion removes cover for cyber-related professional negligence. Explicit affirmation confirms cover at a stated sublimit. The affirmation route is generally preferable for professional services firms.
Most UK PI wordings exclude “insured versus insured” claims, which can include claims by former partners against the firm. Variations include exceptions after a stated period (typically the limitation period) and sublimited extensions for partner-versus-partner disputes. Firms with active partnership rotation should review this clause at every renewal.
Apex Insurance Brokers Ltd is an independent UK insurance broker based in Bristol, advising professional services firms on professional indemnity insurance and related covers. The firm is authorised and regulated by the Financial Conduct Authority (firm reference 724952) and registered at Companies House (company number 07014570).
This commentary reflects market conditions as at May 2026 and is provided for general information. Insurance market conditions, policy wordings and regulatory positions change frequently; firms should obtain advice specific to their circumstances rather than rely on general commentary.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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