Setting up on your own — as a solicitor leaving a partnership, an accountant starting a boutique, an architect founding a practice, an IFA going independent, or an IT consultant hanging out a shingle — brings professional indemnity questions that first-time principals rarely face as employees. This entry walks through what to arrange, when, to what limit, and how the new firm's PI interacts with the old employer's.
Cover must be in force before the firm accepts its first instruction, engagement letter, or fee. Every professional regulator makes this a condition of authorisation. Solicitors in England and Wales are bound by the SRA's Minimum Terms and Conditions (MTC) from the moment the firm is authorised. Chartered accountants under ICAEW must hold PI meeting the ICAEW PII regulations before commencing public practice. Architects registered with the ARB must hold adequate and appropriate insurance under the Architects Code Standard 8. Financial advisers hold PI as a condition of FCA authorisation set out in MIPRU 3.
Regulator inspections can check the certificate. A firm that took on client work before cover incepted is exposed both to the underlying liability and to a regulatory breach. Arrange the policy so inception aligns with, or predates, the day you first accept instructions.
The minimum limit is the higher of the regulator's mandated floor and any client contract requirements. The SRA MTC sets £2 million each and every claim (£3 million for LLPs and companies). ICAEW requires the greater of two-and-a-half times gross fee income or a fixed monetary floor by turnover band. Architects under ARB face a limit scaled to practice size and project value. Financial advisers under MIPRU 3 face limits set by the FCA that scale with income.
Check any client contracts in view. Public-sector frameworks, larger corporate clients, and construction consultant appointments frequently demand £5 million or £10 million limits. It is cheaper to arrange the required limit at inception than to buy it up mid-year.
Work you did while employed at a previous firm remains the responsibility of that firm's PI. You do not carry the liability with you when you leave. If a claim arises in your third year of sole practice relating to advice given as an associate at your previous firm, it is notified to the previous firm's insurer, not yours. PI policies attach liability to the firm that generated the work, not to the individual practitioner.
The new firm's policy does not need to cover the back-catalogue in the ordinary case. Some policies contain retroactive dates or exclusions that could inadvertently pick up prior-firm work — a broker can review the wording at inception.
Run-off cover for the work you did at your former firm is arranged by the former firm, not by you. If the previous firm continues to trade, its annual renewals continue to protect the work you did there. If it ceases to trade, the run-off obligation falls on that firm and its insurer under the regulator's rules — solicitors' firms, for example, must carry six years of MTC-compliant run-off. You have no personal obligation to arrange it.
At inception you owe a duty of fair presentation under section 3 of the Insurance Act 2015. That duty requires disclosure of every material circumstance which you know or ought to know, in a manner reasonably clear and accessible to a prudent insurer. That includes complaints, circumstances, or claims made against you personally, or against any firm you were part of, whether or not those matters resulted in a payment. Closed-without-payment matters are still disclosable.
Most PI policies contain a claim-notified-in-advance clause: a circumstance you knew about before inception is not covered under the new policy — it should have been notified to the earlier insurer. Getting disclosure right at inception protects the cover and the underwriting relationship.
Start with the regulator minimum plus contract requirements, then review at every renewal. As turnover grows, as headcount grows, and as the profile of work changes, the appropriate limit rises. A broker will benchmark the limit against the firm's own risk profile and the market for firms of similar size and discipline.
A newly-qualified solicitor leaves a large City firm to set up as a sole practitioner. Before accepting the first instruction, she arranges SRA MTC-compliant PI at £2 million each and every claim through her broker. Historical work she did as an associate at the previous firm remains covered by that firm's PI. At proposal stage she discloses two matters from her time as an associate — a complaint closed without payment and a circumstance already notified to the previous firm's insurer. The broker walks her through the proposal form question by question, and the underwriter accepts the risk on ordinary terms.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.