Limitation of Indemnity Insurance Liability

Limitation of Indemnity Insurance liability (Word file)

1. The Bar Council is occasionally asked for advice from members of the Bar dealing with substantial claims about the extent to which they can limit their liability in negligence.

2. This is a complex question and one that involves not simply the Bar’s Code of Conduct, but also the substantive law. The Legal Services Committee and the Professional Standards Committee have looked at the question and prepared the following guidance that barristers should consider.

The Code of Conduct and the Law

3. Barristers are subject to the general law. There are circumstances at law in which barristers may limit or exclude their liability. However, the question of when and how they may do so, and how such exclusions or limitations can be made effective raises complex legal issues upon which the Bar Council cannot advise. In particular, barristers considering excluding or limiting liability should consider carefully the ramifications of the Unfair Contract Terms Act 1977 and other legislation and case law.

4. There is nothing in the Code of Conduct to prevent barristers limiting their liability in ways which are permitted at law. Having said that, the Bar Council does not believe that it is good practice to seek to limit liability except where the barrister’s potential liability for professional negligence in respect of the case could exceed the level of available professional indemnity insurance. In particular, if a barrister is found by the court to have limited liability in a way which is in breach of the Unfair Contract Terms Act, that might well amount to professional misconduct.

Amendments to the Code

5. The Bar Council is seeking approval for amendments to the Code which will allow barristers to refuse work if the potential liability for professional negligence could exceed the level of professional indemnity insurance which is reasonably available and likely to be available in the market for the relevant periods on terms which it is reasonable for him to accept. We will issue further guidance once this rule has received approval from the Secretary of State for Constitutional Affairs.

Generally

6. All barristers in independent practice should regularly review the amount of their professional indemnity insurance cover, taking into account the type of work which they undertake and the likely liability for negligence. The BMIF’s minimum cover should not be assumed to be sufficient. While the Bar Council and the BMIF are considering whether this minimum amount should be increased generally, barristers must take responsibility for assessing their own particular needs. They should be aware that claims can arise many years after the cause of action and that they would be prudent to maintain insurance cover for that time. They should bear this in mind when arranging run-off cover if they cease practice. If in doubt, it would be prudent to seek advice from the BMIF.

7. The Bar Council will issue further guidance when the amendments to the Code of Conduct have been approved.

Professional Standards Committee

October 2004