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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3840
Experience:  Solicitors 2 years plus PQE
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Re: Professional indemnity insurance I was a member of an

Customer Question

Re: Professional indemnity insurance

I was a member of an LLP which has ceased to trade and are required to maintain professional indemnity insurance "run-off" cover for a period of 6 years post cessation.

I am now trading on my own but much of my work comes from work which was previously done by the LLP.

I have been asked by the other members of the LLP to incorporate the run-off cover within my own PII policy in return for a lump sum payment which will effectively cover the costs of the difference in premiums over the next 6 years (although those premiums will obviously depend on a number of factors going forward)

Is it advisable to do this as I am obviously taking on risk personally that there is a claim against the work done by the LLP for which I would then be required to pay any excess on the policy and any resultant increase in premiums etc.

They are basically wanting to cover my additional premiums but then wash their hands of any future liability. Would it be better for me to insist that the LLP is responsible for its own run-off cover?
Submitted: 3 years ago.
Category: Law
Expert:  Alex J. replied 3 years ago.

Thank you for your question and welcome.

My name is AJ and I will assist you.

I would personally not agree to this for the following reasons:
1. It could affect the premiums for your new business;
2. The claims relate to claims against your old LLP, I conceptually cannot see how your existing insurer will agree to insure them;
3. The premiums could fluctuate or change and you will only get one lump sum;
4. You will have the time and hassle of administering the claims;
5. It may affect your future ability to get indemnity insurance for your current business.

Would you like to discuss this any further?

I look forward to hearing from you.

Kind regards

Customer: replied 3 years ago.
Thank you for your reply AJ.

The insurer for the old LLP has agreed to provide the cover which will include my new business plus the run-off cover for the old LLP.

I think my main concern is that the other members will not have any liability should there be any claim made against the old LLP if I agree to take on the insurance.

Presumably, should the level of insurance cover be insufficient for any particular claim then I personally would be liable for any excess over and above the indemnity limit in the policy?
Expert:  Alex J. replied 3 years ago.

Thank you.

Is this not something you can make a risk assessment on?

The reason why the run off is six years is because most claims are statute barred 6 years after the end of the provision of the service. You could look at the clients whose matters may still be subject to a claim and see what the liabilities might. As the years go on then the number of claims that are possible are obviously going to decrease therefore the liabilities will decrease as well.

When the LLP closed did it have many clients?

Also it is an LLP is the liability not limited anyway?

Kind regards