The case for Professional Indemnity Insurance for Costs Lawyers

Having Professional Indemnity Insurance (PII) is crucial to practising as a qualified and regulated Costs Lawyer. This is a vital consideration to prevent potentially damaging or even catastrophic financial exposure.

The minimum limit of indemnity, as required by the Costs Lawyer Standards Board (CLSB), is £100,000 but in reality this can be far from sufficient and it is vitally important to cover for full liability. Costs Lawyers must ensure they assess all financial risks associated with the work being undertaken; and that PII is in place to an appropriate level.

The impact of widely-publicised lawsuits in recent years, such as Andrew Mitchell MP v News Group Newspapers Ltd (2013), has put the spotlight on the need for greater attention to be paid to the level of potential exposure when dealing with such high liability cases.

How Much Cover Do I Need?

In 2014, changes were made to the CLSB’s rules regarding insurance, making it the responsibility of the Costs Lawyer to acquire a level of insurance commensurate with the financial risk of the work they are undertaking.

At the time, the CLSB noted that although £100,000 was the minimum required limit of indemnity, financial risk had increased for those undertaking costs budgeting and management work and that there was a responsibility for the insured to assess their financial exposures.

The regulator said “Subsequent case law clearly demonstrated the courts are adopting a strict application of costs budgeting and costs management rules”, and that “a Costs Lawyer

[must assess] financial risk based on their instruction and [ensure that] they put in place an appropriate level of Professional Indemnity Insurance attributable to those identified risks.”

Do I Understand the Guidelines?

Emphasising a “needs-be basis”, the CLSB recognised that “it was considered unfair to increase minimum insurance requirements and costs to practitioners across the whole of the profession which would inevitably and unnecessarily filter through to the consumer.”

With the onus now being on Costs Lawyers themselves to assess their exposure, it is important to get the figures right first time or risk the consequences.

Only the most experienced insurance brokers will ask the right questions to determine the level of cover required and meticulously tailor the correct plan to accommodate specific needs and avoid unnecessary costs.

Substantial experiential knowledge of the sector and dedicated teams are all valuable qualities, but a thorough understanding of your individual risks is paramount to placing an appropriate policy.

Do I Know What My Exposures Are?

Law firms are delegating more of the items of work that are genuinely subject to time limits, meaning the Costs Lawyer’s exposure is even further increased.

Costs Lawyers should not be confused with Law Costs Draftsmen or Costs Draftsmen – be certain that your insurer understands what you do. If not, you run the risk of not being covered.

As a Costs Lawyer you are authorised under the Legal Services Act 2007 to carry out a number of reserved legal activities – does your current insurer know this? Do they fully understand the extent of the scope of activities in which you are involved? Once again, if the answer is no, you may not be covered.

If you would like to have a greater understanding of the potential risks to your business, and livelihood, please contact Claire Russell via email –