Claim exceeds cover · UK
What happens when a claim exceeds your PI cover
Reviewed by Apex Insurance Brokers (FCA FRN 724952) · Published 15 July 2026
A rare but catastrophic scenario: the claim value exceeds available PI. Legal, financial, and regulatory consequences follow.
The immediate legal position
Insurer pays up to the aggregate limit.
The insured firm is liable for the excess — from firm assets.
Partners in a traditional partnership: personal liability for the excess.
LLP members: usually protected from personal liability.
Directors of a Ltd company: usually protected from personal liability (subject to Companies Act 2006 duties).
Consequences for the firm
- Balance sheet impact of paying the excess from firm funds.
- Potential insolvency if excess is material.
- Regulator engagement — sector-specific implications.
- Reputation impact with clients and future work.
- Insurance market rating impact — future renewals materially affected.
- Personal liability for partners in a traditional partnership.
Prevention — what should have happened
- Aggregate limit sized to reflect worst-case single-claim exposure.
- Layered programme for larger firms.
- Regular review of adequacy against portfolio exposure.
- Insurer wording review for aggregation and exclusions.
- For high-risk work: excess-of-loss layer above primary.
Mitigation once it happens
- Negotiate settlement below claim value where possible.
- Consider CCJ management or negotiated payment plans.
- Assess successor-practice or run-off implications.
- Communicate transparently with regulator.
- Consider insolvency options where excess is unmanageable.
- Preserve documentation for any subsequent PI negotiation.
Regulatory implications by sector
- Solicitors: SRA MTC applies to SRA-regulated firms; excess to firm/partners.
- Architects: ARB adequacy standard breached — regulatory implications.
- Accountants: ICAEW Bye-law 61 minimums met but excess to firm.
- IFAs: FCA notification for material claim.
- Insurance brokers: MIPRU 3 minimums met but excess to firm.
Frequently asked
How often does this happen?
Rare — well under 1% of PI claims exceed cover. But when it does, materially affects the firm.
Am I personally liable?
Depends on firm structure. Traditional partnership: yes. LLP or Ltd: usually protected.
Can I get top-up cover after the fact?
No — PI is claims-made and doesn't backdate.
What if the firm can't pay the excess?
Insolvency options may apply. Client compensation via industry schemes (e.g., SRA Compensation Fund for solicitors) may follow.
Does this happen to my personal assets?
Depends on structure. Personal assets exposed for traditional partnership. Protected for LLP or Ltd.
Should I have layered cover?
For firms with high concentrated exposure, yes. Excess-of-loss above primary is standard for larger firms.
Related
- PI defence-cost cap in PI insurance
- Sizing your PI limit decision framework
- Solicitor SRA Compensation Fund and claims
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. Registered in England and Wales, company number 07014570.
Offices: QCS, 53 Queen Charlotte Street, Bristol BS1 4HQ · Unit 24, Basepoint Centre, Jubilee Close, Weymouth DT4 7BS