What happens if the lawyer I choose charges higher fees than the insurer's panel rates?

If the insurer approves the appointment of an external lawyer, fees are usually covered up to a reasonable and customary limit. Any amount exceeding the approved limit may need to be paid by the insured.

Will the insurer defend me even if the claim appears false?

Professional indemnity insurance typically covers legal defence costs for claims that may be unfounded or frivolous, subject to policy conditions. The insurer supports the defence process to help establish the facts of the case.

Lawyer appointment process in a professional indemnity insurance

Q: Can I settle a claim out of court without the insurer's consent?

Most professional indemnity policies include a consent to settle clause. Settling a claim privately without the insurer’s involvement may result in denial of reimbursement for the settlement amount and related legal expenses, subject to policy terms.

Q: Does the insurer pay the lawyer directly?

In many cases, the insurer directly pays the legal fees to the appointed counsel as part of the duty to defend, helping the insured avoid upfront legal expense management.

Q: What is the role of the broker during the claim process?

The broker assists in notifying the claim, coordinating communication between the insured and the insurer, and facilitating timely appointment of legal counsel. They help ensure the claims process proceeds efficiently in accordance with policy terms.

Professional Indemnity Insurance

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February 9, 2026

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Professional indemnity insurance covers defense costs, the process of lawyer appointment, and associated costs i.e. charge of legal defense once a lawsuit has been filed against the insured.

Key Takeaways

Immediate Reporting is Crucial: The clock starts ticking the moment a legal notice is received. Delaying notification to the insurer can sometimes lead to a denial of coverage based on policy terms.
Duty vs. Right to Defend: A “Duty to Defend” policy means the insurer manages the defense from the start, whereas a “Right to Defend” policy gives the insured more control over selecting their counsel, usually with insurer approval.
Specialized Legal Panel: Insurers maintain panels of lawyers who specialize in specific professional fields (medical, legal, engineering, etc.), ensuring the defense is technically sound.
Approval of Choice: While insurers have panels, they often accommodate the insured’s choice of counsel for high-intensity or highly specialized claims, provided the fees are reasonable.
Loss Prevention: Beyond defense, the process often includes recommendations for “Loss Prevention” to mitigate the impact of the current claim and prevent future occurrences.

Listed below is the manner that would manage the claim, once triggered:

Insured receives a legal notice or a complaint threatening legal action
It is the insured’s duty to inform the insurer/broker of the incident immediately
Depending on whether the professional indemnity policy form is a duty to defend or a right to defend, the insurer will carry out the process of lawyer appointment from its legal panel or seek recommendations from the insured on their choice of the legal representative
The insurer’s legal panel constitutes legal counsel of multiple specializations. In case the insurer deems it needful it may appoint a specialized legal counsel from outside.
Based on the intensity of the claim, the insurer may approve the insured’s choice of legal counsel. And recommend loss prevention measures

Insurer’s claim team and insured conduct a joint meeting with the appointed legal counsel. And provided all relevant case facts for representation.

Summary: PI Insurance Claim Management

Stage	Action Required	Responsibility
Notification	Immediately inform the insurer/broker after receiving a legal notice.	Insured
Lawyer Selection	Selection from the insurer’s legal panel or an approved specialist.	Insurer/Insured
Specialization	Match the legal counsel’s expertise to the specific claim type.	Insurer
Collaboration	Joint meeting between the claims team, insured, and lawyer.	All Parties
Defense Strategy	Providing all relevant case facts for robust representation.	Insured

Frequently Asked Questions (FAQs)

Q1: Can I settle a claim out of court without the insurer’s consent?

A) No. Most professional indemnity policies have a “Consent to Settle” clause. If you settle a claim privately without involving the insurer, they may refuse to reimburse you for the settlement amount or the legal costs incurred.

Q2: What happens if the lawyer I want to hire is more expensive than the insurer’s panel?

A) If the insurer approves your choice of counsel, they will typically pay the fees up to a “Reasonable and Customary” limit. Any excess fees charged by your preferred lawyer would generally have to be borne by you personally.

Q3: Does the insurer pay the lawyer directly?

A) Yes, in most “Duty to Defend” scenarios, the insurer handles the payment of legal fees directly to the appointed counsel, so the insured doesn’t have to manage the cash flow for legal expenses.

Q4: Will the insurer defend me even if the claim is clearly false?

A) Yes. One of the primary benefits of PI insurance is covering the cost of defending yourself against frivolous or groundless lawsuits. The policy covers the legal fees required to prove your innocence in court.

Q5: What is the role of the broker during the claim process?

A) The broker acts as a vital intermediary. They help you draft the initial notification, coordinate between you and the insurer’s claims team, and ensure that the lawyer appointment happens quickly and aligns with your specialization needs.

About The Author

Gaurav Bhardwaj

MBA Insurance Management

He is a seasoned writer renowned for crafting insightful articles on professional indemnity policies for SecureNow. With 9 years of expertise in the field, Gourav possesses a comprehensive understanding of professional indemnity insurance, navigating its complexities with ease. Their articles offer valuable insights into the importance of professional indemnity coverage for businesses and professionals, providing practical advice and guidance on policy selection and risk management strategies. Backed by a wealth of experience and a commitment to excellence, Gaurav is dedicated to delivering informative and engaging content that empowers readers to make informed insurance decisions.

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