Professional Indemnity Insurance/Insurance General

Question 1

What is a Professional Indemnity Insurance?

Answer 1

Covers the policy holder for the costs of legal action made against them in respect of financial loss due to negligence, error or omission in professional advice or services.

Question 2

What is the RICS guidance on PII Requirements?

Answer 2

UK professional Indemnity Insurance Requirements – Version 9 from 1st April 22.

Question 3

What is the purpose of indemnity insurance?

Answer 3

• Ensures that if the firm faces a claim, it is protected against financial loss
• Protects insured members against consequences of its liability to pay damages to third parties for breaches of professional duty
• Ensures that the firms clients do not suffer financial loss which the firm cannot meet.

Question 4

What is the difference between ‘any one claim’ and ‘aggregate policies?

Answer 4

• Aggregate – covers up to the full limit for all claims made in the period of insurance.
• Example: £100k cover in the aggregate but two £100k claims are made – only £100k would be paid and £100k would need to be paid by others (up to the limit of the insurance)
• Any one claim – Provides cover limit for EACH individual claim made in the period of insurance
• Example: If the any one claim limit is £100k and 6 claims are made, the insurer would only cover up to £100k limit but would pay for all (totalling £600k)

Question 5

What are the minimum limits of indemnity?

Answer 5

• Turnover £100k or less - £250k minimum limit of indemnity
• Turnover £100,001k to 200k - £500k minimum limit of indemnity
• Turnover £200,001k plus - £1m minimum limit of indemnity

Question 6

What is the maximum level of uninsured excess?

Answer 6

• Turnover £10m or less – The greater of 2.5% of sum insured or £10k
• Turnover £10,000,001 plus – No limit set

Question 7

What is professional indemnity insurance run off cover?

Answer 7

• Run off cover, covers the historic liabilities of a business after it ceases to trade.
• The policy covers legacy issues.

Question 8

How long should run-off cover be in place?

Answer 8

Should be maintained for a minimum period of 6 years from the cessation of the practice.

Question 9

Tell me about Merrett v Babb

Answer 9

Babb completed a valuation for a house purchase by Merrett
Valuation was later found to be negligent
Original company no longer existing and Babb’s PI policy had been cancelled
Court ruled that Merrett could pursue Babb for losses.

Question 10

What measures do you take to avoid PII claims?

Answer 10

• Keep full detailed records of meetings and conversations;
• Record recommendations and advice given
• Follow RICS rules of conduct
• Follow company procedures and policy
• Do not advise outside of my specialism

Question 11

What is professional Negligence?

Answer 11

When a professional fails to perform their responsibilities to the required standard or breaches a duty of care which results in injury, damage or financial loss.

Question 12

How can an employer/client recover loss if a consultant is negligent?

Answer 12

Making a claim on their Professional Indemnity Insurance.

Question 13

What is product liability insurance?

Answer 13

Product liability insurance covers against a compensation case brought against a manufacturer or supplier of products for loss, damage or injury,

Question 14

What is public liability insurance?

Answer 14

covers the cost of claims made by members of the public for incidents that occur in connection with your business activities. (brick hits a member of the public)

Question 15

What is employers liability insurance?

Answer 15

Safeguards businesses against legal and compensation expenses from employee claims (work related injuries)