Cyber Cover in PII – Changes to the CLC’s Minimum Terms and Conditions

27 September, 2021

The Legal Services Board approved on 21 September the CLC’s proposed amendments to its Minimum Terms and Conditions (MTC) for Professional Indemnity Insurance (PII). The changes set out to clarify the extent of cover for cyber-related losses while maintaining consumer protections. Read the Decision Notice

These amendments follow directions from the Prudential Regulation Authority (PRA) and Lloyd’s of London that the extent of cover for cyber-related losses in professional indemnity insurance (PII) policies is clarified. The PRA expects all insurers to have action plans in place to reduce silent cyber exposures, and Lloyd’s requires that all policies must address cyber and exclude or provide affirmative cover for cyber risks.

Full details of the changes are set out in the CLC’s application to the Legal Services Board. Three new defined terms have been added to the MTCs. These are Computer Network, Computer System, and Data (referring to electronic data). The definitions are taken and adapted from definitions in cyber-risks endorsements developed by the International Underwriters Association. We have added a new Cyber-Related Losses Affirmation at 8.13.

To develop this new clause, we took as our starting point a model endorsement drafted by the International Underwriters Association to address the issue of ‘silent cyber’ exposures. The CLC then worked with specialist lawyers and Counsel to draft the new clause at 8.13. That clause retains what are clearly professional indemnity protections for consumers, while clarifying cover for cyber risks as required by the PRA and Lloyd’s. The new wording aims to expressly affirm or grant cover for cyber-related losses to the extent that these are already covered in a non-affirmative way by the MTCs.

The new MTCs will take effect from 1^st October 2021 and will apply to policies written after that date. The CLC is in the process of reviewing other aspects of PII, following a Call for Evidence over the summer. A formal consultation on any changes will begin later in 2021.