Prior Practices

Your Professional Indemnity Insurance

If your law practice merges with or acquires another law practice (including in the circumstances set out in clause 40 below), the Lawcover Professional Indemnity Insurance (PII) policy allows us to make a prior practice determination that means you become the successor practice to the law practice you have merged with or acquired.

The relevant clauses in the 2024/25 PII policy are:

39. The insured agree that
    1. we may determine whether the law practice is the successor to a prior practice and we will notify the insured of such determination.
40. In so determining, we may have regard to one or more of the following:
    1. the law practice holding itself out as the successor of the prior practice or as incorporating it where:
       1. the holding out can be express or implied;
       2. the holding out can be contained in notepaper, business cards, form of electronic communications, publications, promotional material or otherwise, or is contained in any statement or declaration the law practice makes to any regulatory or taxation authority;
    2. the law practice employing, or taking on as principals, all or a majority of the principals of the prior practice;
    3. the law practice employing a majority of the employees previously employed by the prior practice;
    4. the law practice acquiring the goodwill, the assets, or the majority of client files of the prior practice; or assuming its liabilities;
    5. the law practice adopting the name formerly used by the prior practice, or a name which substantially incorporates that name;
    6. the law practice carrying on business from the premises of the prior practice.
    7. any other relevant information that the law practice submits.

The effect of a prior practice determination is that continuity of cover will be maintained for all the former principals and employees of the prior practice under your law practice’s PII policy.

It also means that the gross fee income (GFI) and claims history of the prior practice and the successor practice will be combined for premium rating purposes. As we use a law practice’s GFI and claims history to calculate its PII premium, combining the history of both law practices may affect whether the successor practice is entitled to a claims discount or will be subject to a claims loading.

The impact that a merger with or acquisition of a prior practice may have on a law practice’s future PII premiums is just one factor to consider when making your decision. Before you merge with or acquire an existing law practice, we recommend that you enquire into the professional standing and performance of that law practice.

We have prepared a due diligence guide which you can use to assist you when considering whether or not to merge with or acquire another law practice. We also recommend that you take independent legal advice prior to merging with or acquiring another law practice. The “Due Diligence Guide for Principals” is accessible here.