Professional indemnity insurance for Australian law firms
Every Australian law practice must hold professional indemnity (PI) insurance that meets the minimum cover set by its home law society or legal services commissioner. The cover is usually written through a single state-scheme insurer with a minimum sum insured (typically $1.5M-$2M per claim). This guide walks through 10 compliance duties every AU firm should observe.
Coverage
Every law practice holding a practising certificate in any Australian state or territory. The obligation usually attaches to the principal of the practice. Barristers have separate BARR schemes. Incorporated legal practices are also caught.
Legal basis
The obligation is set under the Legal Profession Uniform Law (NSW, VIC, WA), Legal Profession Act 2007 (QLD), Legal Practitioners Act 1981 (SA), and equivalent state legislation. Each state has a nominated insurer (LawCover NSW, LPLC VIC, Lexon QLD, LPIC SA, etc.) administering the mandatory scheme.
The obligations
Hold mandatory PI cover before practising
A law practice cannot issue invoices or engage clients without first holding valid PI cover for the current practising year. The certificate is typically issued or renewed by the state scheme each 1 July.
Observe the minimum sum insured
State schemes require a minimum sum insured per claim. NSW and VIC: $2 million. QLD: $1.5 million. Top-up cover above the minimum is commonly held for higher-risk practice areas (commercial, conveyancing volume).
Disclose prior circumstances at renewal
At renewal, disclose every circumstance that might reasonably give rise to a claim, whether a formal claim has been made or not. Failure to disclose can void cover — a high-risk exposure.
Notify claims and potential claims immediately
Notify the PI insurer as soon as a claim is made or a circumstance that could give rise to a claim is identified. Most policies require notification within 30 days. Late notification can prejudice cover.
Arrange run-off cover on practice closure
When a practice closes or a principal retires, run-off cover is required — usually 7 years. Most state schemes provide run-off automatically, but practitioners must notify the scheme and pay any premium due.
Maintain cover through practice changes
Mergers, acquisitions, or changes of business name require the scheme to be notified and the policy updated. Gaps in cover during a transaction create significant exposure.
Cooperate with the insurer and defence counsel
The policy requires full cooperation — providing documents, attending defence consultations, and giving truthful evidence. Refusal to cooperate can void cover.
Observe the costs inclusive / costs exclusive distinction
Some state schemes (LawCover) are costs-inclusive (defence costs erode the limit), others (LPLC) have costs on top. Understand which applies and consider top-up cover if costs exposure is material.
Manage the excess appropriately
Every scheme has a per-claim excess payable by the firm. The firm must be in a financial position to meet the excess — otherwise the claim could be uninsured in practice. Plan for the excess in the firm's cashflow.
Maintain a documented claims-prevention program
State schemes often offer CPD credit or premium discount for firms running a documented claims-prevention program — conflict-checking, limitation-monitoring, diary and matter management systems.
What happens if you do not comply
Practising without valid PI cover is unsatisfactory professional conduct or professional misconduct. Consequences include immediate practising certificate suspension, referral to the local regulatory authority, and personal liability for any claim arising during the uninsured period.
Reporting requirements
Annual cover certificate is issued by the scheme at practising certificate renewal (1 July). Notifications of claims and circumstances go to the scheme on the prescribed form. Run-off cover requires notification of practice closure.
What firms should do today
- Review the PI renewal questions with the principals each June before the 1 July renewal deadline
- Maintain a circumstances register — any matter that might give rise to a claim, with a date, note, and responsible partner
- Engage an insurance broker who specialises in the legal profession — especially for top-up and ATE cover
- Run an annual risk management file-check session for every fee earner
- Set a calendar reminder for 30-day notification windows on any matter where a claim is possible
- Document the firm's claims-prevention program for premium discount qualification
Compliance with Quillio
Quillio drafts notification letters to PI insurers, circumstances registers, and internal claims-prevention policies with the relevant state scheme rules cited. See /resources/security or start a free trial.
This guide is general information about professional indemnity insurance for AU lawyers — not insurance or legal advice. Cover terms, notification requirements, and scheme rules differ between states. Obtain specialist insurance broker advice and confirm current scheme rules annually.
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