Professional indemnity insurance and compensation fund

As in any other profession, professional negligence and acts of dishonesty are bound to occur and necessitating the protection of both members of the profession and the public from the resulting losses. Hence, the introduction of compulsory insurance coverage and the establishment of a compensation fund for such purposes. The Legal Profession (Amendment) Act 1992, which came into force on 1 April 1992 made Professional Indemnity Insurance compulsory for legal practitioners. And with the amendment to the Legal Profession Act 1976 vide the Legal Profession (Amendment) Act 2024, it also includes the limited liability law partnership. Details on this scheme are provided in the Legal Profession (Professional Liability) (Insurance) Rules 1992. The compulsory insurance aims to protect lawyers and the public from the risks of damages, and matters related to professional incidents. It tends to reduce the burden on practitioners of having to pay compensation for their errors out of their own pockets. Aside from the above, the Advocates and Solicitors Compensation Fund, established by the Malaysian Bar reimburses clients for financial losses suffered due to dishonesty on the part of an advocate and solicitor or any of his clerks or servants. Payments from the Fund are “in the form of grants to mitigate losses sustained by members of the public caused by the acts of dishonesty of an advocate and solicitor”.7 Having said the above, this Chapter discusses the professional indemnity insurance scheme as well as payments from the Compensation Fund.