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Flashcards in Professional Indemnity Insurance Deck (23)
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What is Professional Indemnity Insurance?

Protects firms against losses resulting from professional negligence, errors and/or omissions which cause financial loss to a third party
Ensures a firm's clients do not suffer financial loss which the firm cannot meet


What do you need if you start your own business?

- Inform RICS
- Appoint a contact
- Apply for RICS Regulation
-Have at least 25% principals
-Agree to observe and comply with RICS Rules of Conduct for Firms, including working to RICS standards.
-Insurances (P.I, Public Liability, Employers Liability)
- Action & training to deal with Clients Money
- Complaints handling procedures and training


What is run off cover?

Ensure that firms, members and their clients are not exposed to financial detriment in the period following a firm ceasing to trade
RICS requires firms to obtain fully retroactive run-off cover


What are the minimum levels of PII required?

1) £0 - 100k = £250k
2) £100k - £200k = £500k
3) >£200 = min. £1m


What is the minimum level of run off cover?

Consumer claims: £1m
Non-consumer claims: adequate and appropriate cover


What is the premium for P I?

Typically between 1 - 5% of turnover dependent on what it is covering


What is the premium of P I based on?

Size of Firm
Nr of partners
Type of projects
Claims history


What is maximum uninsured excess?

Dependent on limit of indemnity:
< or = £500k : greater sum of 2.5% or £10k
Over £500k: 2.5% of sum insured


Why do RICS members need P I (if they own a business)?

To meet standards approved by the regulatory board


What is fully retroactive?

All former work carried out will be covered if retroactive date is "none" regardless of when negligent act occurred


What is adequate for run off consumer claims? (Type of claim basis)

Each and every claim


What is run off pool?

Firms that are unable to obtain run-off from their incumbent insurer or the open market will be able to apply for coverage to the Assigned Risk Pool which is in line with RICS


What should a PII policy contain?

1) Any one claim or aggregate plus unlimited round the clock reinstatement basis;
2) each and every claim basis
3) full civil liability basis
4)Underwritten by a listed insurer
5)Covers past and present employees
6)Run-off cover
7)Minimum level of indemnity required by the RICS
8) Fully retroactive
9) Wording in line with RICS requirements


When should you let your PI insurer know about a complaint?

- This depends on your PII policy.
- PII policy normally obliged to advise insurer on any situation which may give rise to a claim.


What has the RICS changed regarding PII?

To this end, we undertook a consultation earlier this year to:
- minimum insurance requirements
- more flexibility on PII terms
- Amended the Assigned Risk Pool
- Fire Cover
- Cyber Cover


How long should Run Off Cover apply?

6 years as recommended by the RICS.

Risk will reduce over time of 6 years


How to avoid P.I claims?

Refer to scope of services
Use RICS guidance
Keep record of all work done
QA procedures


How does insurers limit liability?

Caps on exposure arising from a claim


What case law is applicable to P.I.I and run off cover?

Merit vs Babb 2001
Mr Babb's employer no longer traded
No Run Off Cover


Where can you find guidance on P.I?

P.I.I Requirements
Risk Liability and Insurance


What were the updates to P I I?

Firms have been unable to obtain fire protection from 1st May 21

Insurers (without specific dispensation) are now permitted to:
provide cover on fire safety claims four storeys or less on aggregate, defence cost basis

Cyber cover


What is Risk Liability and Insurance?

Guidance Note


When would notify your PI insurers on a complaint?

Anything that could result to a claim
If it reaches external stage