Professional indemnity insurance—accountants and auditors (ICAEW)

Clarity is key when talking to customers about their professional indemnity cover.” - Liam Barry, PI Underwriting Manager (Emerging and Traditional) Understand why this cover is necessary and what protection it provides Having worked as a professional indemnity insurance broker for many years, I know there is one very important part of insurance cover that many clients are unfamiliar with – run-off insurance. Run-off insurance is professional indemnity insurance cover provided for the past liabilities of a business once it has ceased trading. This is to protect both the business and its clients from financial losses suffered as a result of professional negligence. Many regulated professionals are required to obtain run-off insurance and maintain cover for a minimum period as specified by their regulatory body.

• For office-based businesses, minimum often includes EL, Public Liability, and contents insurance.
• For construction contractors, minimum typically includes EL, Public Liability, and Contract Works insurance.
• For consultants, minimum often includes Professional Indemnity and Public Liability insurance.
• For retail businesses, minimum includes EL, Public Liability, and Product Liability insurance.
• For hospitality, minimum includes EL, Public Liability, and Employers' Liability.

For professionals like accountants, who are regulated, run-off cover is mandatory and ACCA requires their members have a minimum of six years’ cover.

FAQs on Professional Indemnity Insurance for Accountants

Business contents insurance can help to pay for replacement items so you can get back up and running. Accountants who join industry organisations such as the ICAEW or ACCA are required to have a certain level of professional indemnity cover to meet each organisation’s membership rules. At Hiscox, we offer cover levels that meet the minimum requirements of such bodies. As you gain more professional qualifications and industry expertise, you may offer additional services. Thankfully, your Hiscox policy can grow with you – we also offer a policy wording that is compliant with the ICAEW minimum terms for Chartered Accountants.

16.5 Run-off cost for sole practitioners

With an office insurance package from Hiscox, you can combine several property-focused covers. Start with business contents insurance to protect your offices against damage caused by flood or fire or from losses incurred after a break-in. Add portable equipment insurance to protect items like laptops and smartphones when used away from your offices. And, if you own the building, commercial property (buildings) insurance can cover the bricks and mortar. Note: to add any of the other covers you must first take out business contents insurance. Professional indemnity insurance policies operate on a ‘claims made’ basis – this means that for the policy to respond there needs to be cover in place at the time the claim is made, rather than when the negligence occurred.

• Public Liability insurance is not a legal minimum but is often required for contracts and leases.
• Professional Indemnity insurance is a legal requirement for certain professions like financial advisors.
• Motor insurance is a legal minimum for any company vehicles, with at least third-party cover.
• Product Liability insurance may be required if you manufacture, supply, or repair goods.
• Directors' and Officers' Liability insurance is not legally required but is critical for risk management.

So, for example, if a client makes a claim against you tomorrow for alleged negligent advice given in 2015, then it will be the policy you currently have in place which will respond to the claim.

Liability Cover Options

Employers’ liability insurance can offerprotection against claims made against you by employees who have had an accident or fallen ill as a result of their work. For example, if one of your accountants claims you’vefailed to support them with work-related stress. Note that employers’ liability insurance can be required by law (external link) for any business that employs others. You can be fined up to £2,500 for every day you are not covered. Professional indemnity insurance is compulsory for members of accounting organisations like ACCA and ICAEW.

2. Who you do it for (your clients)

PI cover can help to protect you against the cost of legal action if a client claims they lost money or suffered reputational damage as a result of your work, professional services or advice. Whether you’re settling or defending a claim, you can addlegal fee protection when you take out this insurance, too.Furthermore, in some circumstances, professional indemnity insurance for chartered accountantscan be mandatory. Each business is unique – some accountants may also choose to have public liability insurance. These are just some of the types of business insurance for accountants that we can offer. We can provide other specific types of cover and build them into a policy that’s tailored to the exact needs of your business. It is therefore important not only to maintain cover but to also maintain an adequate level of cover once you have ceased trading. The time limit for professional negligence claims is outlined in the Limitation Act 1980. In general, a claimant has six years to make a claim against you from the date they have suffered the financial loss. This is known as the primary limitation period.

• Check if your business needs Professional Indemnity insurance as mandated by your professional body.
• Review client contracts, as they often specify minimum insurance levels for Public Liability.
• Assess the value of assets and potential business interruption to determine adequate property insurance.
• Consider Cyber Liability insurance, increasingly required in contracts for handling client data.

If a claim is made after this period, then it could be time barred. However, in some instances, there is a possibility of bringing a claim after the primary limitation period – this is known as the secondary limitation period and gives an additional three years from the date the claimant first become aware of the negligence.

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The ICAEW (external link) is the only body in the UK that publishes minimum terms for the Professional Indemnity coverage it requires its chartered members to have. Hiscox has a Chartered Accountant policy wording that meets all the ICAEW minimum terms requirements. Other professional bodies that ask for their members to have PI cover include: Hiscox accountants’ insurance is comprehensive and flexible, so you can tailor the cover to meet the requirements of your professional body. “With 20 years in the industry, I am a professional indemnity insurance specialist. I champion keeping our policy wordings as ‘plain English’ as possible and stamping out unnecessary jargon. Professional negligence claims usually have a 'longstop' of 15 years. If it is discovered that negligent advice had been provided from a professional over 15 years ago then it may not be a possible to pursue a claim. There are some exceptions to this rule, for example if someone has deliberately concealed evidence or relevant facts then an additional six years could be added.

PII Limits for a Chartered Accountant

Hiscox professional indemnity insurance is relevant to many complaints an accountant can face. It can help to cover allegations of negligence, accidental breach of confidence and giving poor business advice. Should you provide good-faith tax guidance which turns out to be misplaced, we may help to pay related legal fees and compensation. Likewise, if your cashflow forecasts turn out to be incorrect and a client sues, insurance can help with the aftermath. Our professional indemnity insurance can also be suitable for tax accountants and company registrars as well as auditing and payroll professionals.

The cyber impact on PI policies

This means a wide range of industry activities, from filing to invoicing, are covered. Every business entity is liable to members of the public for injuries or property damage that might occur because of its activities. Public liability insurance is designed to help absorb the cost of such cases. Many businesses can face public liability claims, even if they aren’t public-facing – for instance, an office sign could fall from a commercial building. However, public liability insurance might be more relevant to businesses with frequent client interactions. If the negligent act involves a minor, then they may also have additional time from when they reach 18 regardless of the 15-year rule. Yes, a claim can still be made against you even if you have ceased trading. Those who operated as a sole practitioner or a partnership may be liable personally for any compensation if found to be negligent. If you traded as a private limited company or a limited liability partnership a claim may still be possible. This depends on what was agreed between buyer and the seller. It is important that this is discussed and forms part of the sales agreement.

15. Insolvency practitioner PI and bonding

Free 24-hour legal and counselling advice helplines. Free tax advice helpline for you and on behalf of your clients. As part of Marsh, global leader in insurance broking and risk management, we have the ability to evolve your cover as your business grows. We support a full range of accountancy clients including those engaging in more complex activities, such as: Policy exclusions and restrictions may exist based on your unique requirements. If you file accounts with HM Revenue and Customs and a miscalculation means thousands of pounds aren’t accounted for, your client could find themselves facing a larger-than-expected tax bill.

Cover starting at £5 a month

If this happens, they may blame you and take legal action to reclaim the lost money. For an accountant, Hiscox business cover can be tailored to include professional indemnity insurance, which helps with the cost of defending and settling the case. It’s welcome protection, whether your accountancy firm makes a mistake or faces false accusations. Your accountancy practice’s office is kitted out with the latest laptops and touchscreen monitors as well as audio and camera equipment for remote calls with clients. When a gang of thieves break-in to the offices overnight and make off with the tech, you’re left struggling to service your clients. It is usual that the past liability is insured by the seller by way of a run-off policy. If you are a buyer then consider whether you want to cover the past liability of a firm where you have had no input in the risk management or work practices.

Should a claim come in from work undertaken by this firm after you have purchased it, then it could negatively affect your own insurance policy.

Why Professional Indemnity Insurance Matters for Accountants

The organisations that facilitate the training and qualification of chartered accountants in the UK and globally will set the rules for their members’ professional indemnity requirements, and this will often include minimum limits for members to have in place for their business. The two main bodies for chartered accountants are ACCA and ICAEW. ACCA (external link) is a global organisation for professional accountants. To become a member of the organisation and an ACCA chartered accountant, you must take and pass the ACCA Qualification. As a bet sports betting odds comparison site member, you are required to have professional indemnity insurance. As a seller, by maintaining your own run-off insurance you can be assured that you have cover for your past liabilities and are not dependent on someone else maintaining this cover for you. Compensation can still be recoverable for negligence against a firm that has become insolvent. The Third Party (Rights Against Insurers) Act 2010 came into force in August 2016.