When a professional indemnity claim or circumstance is notified, the insurer moves through a structured sequence: acknowledgement, cover confirmation, appointment of defence counsel, factual and expert investigation, reserving, settlement discussions, and — where necessary — formal proceedings. The steps are shaped by ICOBS 8 (claims handling), section 13A of the Insurance Act 2015 (payment within a reasonable time), the claims-handling clauses in the policy itself, and — for solicitors in England and Wales — the SRA Minimum Terms and Conditions.
Once a notification is received — see what and when to notify — the insurer usually acknowledges within five to ten business days. The acknowledgement confirms receipt, records the reference, and typically asks for further material: the matter file, correspondence, engagement letter, and a chronology.
The insurer reviews the notification against the policy. Within roughly 30 days the insured should receive one of three responses: cover confirmed in principle, cover confirmed subject to a reservation of rights on specific points, or cover declined with reasons. A reservation of rights is not a decline — it preserves the insurer's position while the facts are established. Under the SRA MTC, qualifying insurers cannot avoid cover for non-disclosure or misrepresentation, which narrows the grounds on which cover can be reserved for regulated solicitor firms.
Most PI insurers instruct panel defence solicitors and, where needed, counsel. The insured is usually consulted on the appointment but the choice sits with the insurer under the co-operation and claims-control clauses of the policy. The panel firm acts for the insured, with the insurer paying defence costs within limit.
The defence team gathers the file, interviews the fee-earners involved, and takes witness statements. In technical claims — an accountant's tax opinion, an architect's design decision, a surveyor's valuation — an independent expert is instructed on whether the professional's work fell below the standard expected. Investigation typically runs two to four months on a mid-complexity claim, longer on multi-party matters.
The insurer sets a reserve — the amount it estimates the claim will cost, including defence costs and any indemnity payment. Reserves are reviewed as the picture develops. The insured is not normally told the reserve figure.
Most PI policies give the insured a consent right on any indemnity settlement up to the policy limit — the insurer cannot compromise the claim in the insured's name without agreement. Above the limit, or where consent is unreasonably withheld, "QC clauses" or arbitration provisions may apply. Settlement is a joint decision, with the insurer usually leading on strategy and the insured retaining a veto on reputationally sensitive terms.
Mediation is now the norm for PI claims of any size. It is faster and cheaper than trial, keeps the outcome confidential, and lets the parties craft commercial terms a court could not order. Insurers will usually push for mediation once the investigation is far enough along to price the risk realistically.
If ADR fails or the claimant issues before settlement, the defence team runs the litigation. Pre-action protocol correspondence, defence, disclosure, witness statements and expert reports follow the standard civil timetable. The insurer continues to fund defence costs within limit.
Section 13A implies a term that insurers must pay valid claims within a reasonable time. What counts as reasonable depends on the type of insurance, the size and complexity of the claim, compliance by the insured with information requests, and factors outside the insurer's control. Complex PI claims can properly take months — sometimes years — without breaching s.13A. See section 13A in more depth.
The insured firm should preserve all documents and electronic communications relating to the matter, engage cooperatively with the panel firm and the insurer, and avoid unilateral communications with the claimant. Admissions, settlement offers, or apologies made without insurer consent can prejudice cover. Route everything through the panel firm and the broker.
Illustrative timeline for a mid-sized solicitor firm claim. A firm notifies a claim in May 2025 alleging negligent advice on a property transaction. The insurer acknowledges within five business days and confirms cover in principle, subject to a general reservation, within 30 days. A panel defence firm is appointed. Investigation — file review, fee-earner interviews, independent expert opinion on the standard of care — runs three months to end August. Reserving is reviewed monthly. Settlement discussions open in October (month five). The parties attend mediation in December (month seven) and settle for £280,000 inclusive of costs. Total elapsed time from notification to settlement is seven months, comfortably within what a court would treat as reasonable under section 13A for a claim of this complexity. Figures are illustrative and every claim turns on its own facts.
Sector guides: solicitors' PI, architects' PI, surveyors' PI, accountants' PI and IFAs' PI. See also notification of circumstance and section 13A in detail.
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.