PII and Risk Flashcards
(38 cards)
What are the minimum PII requirements based on turnover?
Per claim (based on preceding year turnover).
● Turnover £100,000 or less = £250,000
● Turnover £100,001 - £200,000 =
£500,000
● Turnover £200,001 and above =
£1,000,000
Source: RICS Regulation - Professional indemnity insurance requirements (July 2024).
What is the maximum uninsured excess?
● Turnover under £10m = Greater of 2.5%
of insured sum or £10k
● Turnover of over £10m = No limit set
Source: RICS Regulation - Professional indemnity insurance requirements (July 2024).
Summarise the RICS Practice Information - Risk, Liability and Insurance 2021?
● Liability Caps - recommends firms use liability caps to manage risks.
● Third party reliance - firms make clear that their advice may only be relied upon by the named client in their terms of engagement.
T & Cs - 3 key terms considered from a risk perspective
● The scope of the work
● The basis on which the fee will be calculated
● The liability cap
What legislation relates to negligence?
Limitation Act 1980.
What is the Limitation Act 1980?
Legislation which places limitations on the period for claims can be made for breaches of the law.
What limitations are there on claims for negligence?
Limitation Act 1980:
1) Primary limitation period = 6 years from date of negligent act
2) Secondary limitation period = 3 years from date of knowledge (if after the 6 years)
3) Longstop limitation period = 15 years from date of negligent act
● Tort = 6 years from the date the claimant suffered the loss
Contract executed underhand – 6 years
Contract executed as a deed – 12 years
What is negligence?
Failure to provide a duty of cared owed to a client:
● Surveyors have a duty of care to clients and parties
● Must use “reasonable care and skill”
● Negligence = breach of duty of care, and a claim for damages may arise
What insurance do you need to start your own firm?
● PII
● Employers liability
● Public Liability
● Building insurance
What is the purpose of PII?
To protect clients, surveyors and third parties against negligence claims when there is a duty of care breached and a claim for damages arises.
Benefits for the professional / firm:
● Provides protection to a professional from financial losses
● The firm does not have to pay for the claim from their own assets and resources
Benefits for the client:
● Clients are able to recover their financial losses
On what basis is PII underwritten in the UK?
● On a claims made basis = (covers claims which are first made during the insurance period regardless of when the negligent act occurred)
● If retroactive date is stated as ‘none’ then the policy is fully retroactive and all former work carried out by the firm is covered
What RICS Regulation relates to PII?
RICS Regulation - Professional indemnity insurance requirements (July 2024).
What standards should a PII policy cover, according to RICS Regulation - Professional indemnity insurance requirements (July 2024)?
Nature and extent of insurance must be adequate and appropriate with particular regard to:
1) Should be on an ‘each and every’ claim basis (the limit of indemnity is available to every claim) OR aggregate plus unlimited round the clock reinstatement basis (once the full limit has been eroded it will be reinstated an unlimited amount of times)
2) Cover the minimum limit of indemnity based on the firm’s turnover in the preceding year.
3) Meet the RICS’ minimum wording policy or more comprehensive
4) Defence costs in addition to limit of indemnity
5) Should cover past and present employees
6) Should be fully retroactive
7) Underwritten by a listed insurer
8) Include run-off cover
What is an aggregation clause?
● Allows or requires a number of similar or linked claims to be treated as a single claim
● Important to know in regard to the excess applied to any claim (could be reduced if grouped) and available limit of cover (could result in one limit of indemnity payable which may be insufficient for multiple claims)
What is duty of care?
Duty of care exists to clients and third parties, using a ‘reasonable care and skill’. When breached, and there is a loss, a claim for damages arises
Is PII required for ‘pro-bono’ (unpaid work)?
Yes.
What is run-off cover and what is it’s requirement within the RICS Regulation - Professional indemnity insurance requirements (July 2024)?
A type of insurance that provides protection against claims made against a business or individual after they have ceased trading.
RICS requirement:
● Fully retroactive
● For consumer claims - minimum £1m of aggregate cover for 6 years
● For commercial claims - adequate and appropriate for 6 years
What is the RICS Members Support Service?
If you find yourself being sued personally and have no access to PII protection, the Member Support Service can provide defence and advisory services in the UK.
When does a negligence claim arise?
When a duty of care has been breached and it results in a loss, then a damages claim arises.
What measures can be taken to avoid PII / negligence claims?
● Clearly understand the clients objectives and use robust term of engagement with a clear scope of services
● Ensure you are competent to undertake the work
● Keep full and detailed records of meetings and conversations, site notes
● Record recommendations and advise given
● Use RICS Standards and guidance
How can you limit your liability when agreeing terms of appointment?
● Base appointment on reasonable care and skill rather than fitness for purpose (more onerous)
● Ensure run off cover is in place
● Execution of the appointment under hand will result in a reduced liability period of 6 years (instead of 12)
● Use of liability cap in terms of engagement
Is PII excess usually paid per claim?
● Yes, often policies will have excess on a ‘per claim’ basis
● But depends on policy
● However, in the event of an aggregation clause the excess could only be payable for all the grouped items not individually
In a negligence claim what would help to show that you acted with consideration and due process?
● Full and detailed record of meetings and conversations, site notes
● Record of recommendations and advice given
● Use proper letters of engagement, scope of services and term of engagement
Can good record keeping help to provide a defence in PII claims?
● Yes, Important to maintain adequate records and site notes to give evidence of the way a surveyor came to their findings in a negligence claim
● Without them insurers have little to no chance of making successful defence
If you were providing services outside your usual scope to a client, what might you need to do in relation to you PII cover?
● The nature and extent of your insurance must be adequate and appropriate for your business
● Need to check the PII are still appropriate for the risks of the work undertaking
● May need to secure alternative or additional PII cover
