Limited liability partnership PI

Limited liability partnership (LLP) PI is professional indemnity insurance written for an LLP — a body corporate registered under the Limited Liability Partnerships Act 2000 — covering civil liability arising from the LLP's professional activities, with attention to the members' personal exposure for their own negligence.

Definition §

The LLP is a separate body corporate created by the Limited Liability Partnerships Act 2000. It has its own legal personality, its own assets and liabilities, and the capacity to contract, sue, and be sued in its own name. Members of the LLP enjoy limited liability for the LLP's debts and obligations, but each member remains personally liable for their own negligent acts. The LLP itself is also liable, on a vicariously basis, for the negligent acts of its members and employees committed in the course of the LLP's business.^[1]

LLP PI is the policy that addresses this dual exposure. The named insured is the LLP. Cover responds to civil liability arising from the LLP's professional activities, including liabilities incurred by the LLP itself, by its members, and by its employees. The policy typically extends to members in their personal capacities for negligent acts committed while acting as members of the LLP, so that the personal residual liability of individual members is also met from the policy proceeds.^[1]

The LLP structure is widely used in the professional services market, particularly by mid-sized and large solicitors, accountants, surveyors, architects, and consulting firms. It offers the tax transparency of a partnership combined with the limited liability of a company, and it is governed by a set of statutory provisions adapted from company law for partnership-style operation.

LLP PI sits within the same regulatory framework as PI for traditional partnerships, but with some adjustments to reflect the LLP's status as a body corporate. The SRA Minimum Terms and Conditions (MTC) require LLP solicitors' firms to maintain qualifying insurance with a per-claim limit of three million pounds — higher than the two million pound minimum for unincorporated partnerships — reflecting the additional structural complexity and risk profile of the LLP form.^[2]

Legal / Regulatory basis §

The statutory backbone is the Limited Liability Partnerships Act 2000 and the Limited Liability Partnership Regulations 2001, which together apply selected provisions of the Companies Act 2006 and the Insolvency Act 1986 to LLPs. The 2000 Act establishes the LLP as a body corporate with separate legal personality, the limited liability of members, and the basic governance framework. The 2001 Regulations import insolvency procedures, accounting requirements, and other corporate concepts adapted to the LLP context.^[1]

The Insurance Act 2015 governs the placement of the policy. The duty of fair presentation in sections 3 to 8 attributes knowledge across the LLP under section 4: the LLP is taken to know what is known to its senior management and to its members responsible for the placement.^[3] The implied term as to claims handling in section 13A applies in the usual way to claims under an LLP PI policy.^[4]

For solicitors' LLPs, the SRA Indemnity Insurance Rules and the SRA MTC prescribe the form of qualifying insurance. The MTC require a per-claim limit of three million pounds for LLPs and other incorporated practices, with no aggregate limit other than for limited exposures (such as defence costs in respect of certain exclusions).^[2]

For ICAEW chartered accountants operating as LLPs, the ICAEW PII Regulations require PI cover scaled to fee income, with the LLP structure recognised but not given separate treatment.^[5] For RICS-regulated LLPs, the RICS Rules of Conduct 2022 apply the same minimum wording and limits as for traditional partnerships.^[6] For ARB-registered architects' LLPs, the ARB Code of Conduct requires adequate and appropriate PI.^[7]

The Insolvency Act 1986, as modified by the 2001 Regulations, applies to LLPs. Where an LLP becomes insolvent, the Third Parties (Rights against Insurers) Act 2010 permits a third-party claimant to proceed directly against the LLP's PI insurer.^[8]

The Solicitors Act 1974 provides the underlying statutory framework on which the SRA prescribes minimum PI for solicitors' LLPs.^[9]

How it works in practice §

LLP PI placements share many features with partnership PI placements but with adjustments for the LLP form. The proposal form is completed by the LLP, signed by a designated member or by senior management. The disclosure exercise must capture material circumstances known to the LLP's senior management and to any member with relevant knowledge, in line with the Insurance Act 2015's attribution rules.^[3]

The policy schedule names the LLP. Members are typically covered automatically, without individual listing, because they are members of the named insured. Care is required to ensure that any consulting members, salaried members, or other ambiguous categories fall within the policy's definition of 'insured'. Designated members, who carry particular statutory responsibilities under the Limited Liability Partnerships Act 2000, are not given separate treatment in PI policies; the standard insuring agreement responds to their acts in the same way as to the acts of other members.^[1]

In claim handling, the policy responds to claims first made during the policy period and arising from acts after the retroactive date. Notification is the responsibility of the LLP, typically through the managing partner or compliance officer. The insurer appoints defence solicitors and conducts the defence in cooperation with the LLP. Settlement decisions are taken in accordance with the policy.

A particular feature of LLP claim handling is the treatment of individual member liability. A member who has personally been negligent remains liable in their own right; the policy responds on behalf of the member, but the underlying tortious or contractual liability is the member's. Where the LLP is also liable (which is usually the case where the member was acting in the LLP's business), the policy responds on behalf of the LLP as well, but the two liabilities are not duplicated for indemnity purposes; the policy pays the claimant once, on behalf of all liable insureds.

On winding-up or dissolution of the LLP, run-off cover is arranged in the same manner as for a traditional partnership. The standard run-off period is six years, with some professions (notably solicitors) extending cover through SIF successor arrangements.^[2]

Members who leave an LLP that continues to trade are usually covered under the continuing LLP's policy for pre-departure acts. Personal run-off cover for departing members is occasionally arranged where there is doubt about the adequacy or duration of the LLP's run-off.

The LLP is not the same as a limited company, although it shares limited liability characteristics. PI policies for LLPs and limited companies have similar structures, but they differ in detail (particularly around the treatment of directors versus members). Brokers typically use distinct LLP and company wordings to reflect these differences.

Common variations §

Variations include the limit of indemnity (three million pounds for solicitors' LLPs under the MTC; higher limits commonly arranged on top), the structure of cover (single layer versus tower of primary and excess layers), and the geographic scope (UK only or international cover for multi-jurisdiction LLPs).

Some LLPs are owned by corporate members, including service companies or holding companies. PI policies should clarify the treatment of such members and the LLP's relationship with affiliated entities. Group PI structures, with a master policy covering the LLP and its corporate members, are sometimes used.

Salaried members and fixed-share members occupy an intermediate position between equity members and employees. PI policies typically include them within the definition of 'insured' on the same terms as equity members. The Salaried Members Rules in tax legislation are not directly relevant to PI cover, but they may affect the LLP's disclosure of who its 'partners' are at proposal.

Some LLPs operate alongside related entities, such as a service company providing back-office functions or a separate partnership for consultancy work. PI cover should be coordinated across the entity structure to avoid coverage gaps or duplications.

The LLP's annual accounts and other public filings can inform the proposal form. Brokers and insurers often draw on Companies House records to verify members, designated members, and the LLP's registered office, ensuring that the policy schedule is accurate.

Example §

A 12-member solicitors' LLP renews its PI cover with a per-claim limit of three million pounds, no aggregate limit, full prior acts cover, a retroactive date matching the LLP's incorporation date in 2012, and the SRA MTC wording. A client alleges that one member negligently drafted a commercial agreement, causing 850,000 pounds of loss. The insurer accepts notification, appoints defence solicitors, and ultimately settles the matter within the per-claim limit. The LLP itself is liable to the claimant under standard agency principles; the individual member is liable for their own negligence. Both liabilities are met under the single policy. The members' personal assets, beyond their LLP capital contributions, are protected by the LLP form, while the policy protects the LLP's own assets from the claim.

See also §

• /wiki/professional-indemnity-insurance/ — the policy framework
• /wiki/partnership-cover/ — comparison with traditional partnership
• /wiki/sole-practitioner-cover/ — comparison with sole trader structure
• /wiki/run-off-coverage/ — cover after closure
• /wiki/practising-certificate-insurance/ — regulatory dimension
• /wiki/solicitors-indemnity-fund/ — post-six-year arrangements
• /wiki/dishonesty-exclusion/ — interaction with member misconduct
• /wiki/insurance-act-2015/ — statutory backdrop

References §

1. ↑ Limited Liability Partnerships Act 2000 — https://www.legislation.gov.uk/ukpga/2000/12
2. ↑ SRA Indemnity Insurance Rules and SRA Minimum Terms and Conditions — https://www.sra.org.uk/
3. ↑ Insurance Act 2015, sections 3-8 — https://www.legislation.gov.uk/ukpga/2015/4
4. ↑ Insurance Act 2015, section 13A — https://www.legislation.gov.uk/ukpga/2015/4
5. ↑ ICAEW PII Regulations — https://www.icaew.com/
6. ↑ RICS Rules of Conduct 2022 — https://www.rics.org/
7. ↑ ARB Code of Conduct — https://www.arb.org.uk/
8. ↑ Third Parties (Rights against Insurers) Act 2010 — https://www.legislation.gov.uk/ukpga/2010/10
9. ↑ Solicitors Act 1974 — https://www.legislation.gov.uk/ukpga/1974/47