Valuation Flashcards
What is PI Insurance (PII) and why do surveyors need PII?
Professional Indemnity Insurance
Mandatory for practicing surveyors.
It protects surveyors, clients and third parties against negligence claims
Tell me about the RICS requirements in relation to PII.
Latest update was in February 2022
Policy must:
* Be made on an ‘each and every’ claim basis
* Be fully retroactive
* Fire safety exclusions Insurers may impose a fire safety
exclusion but firms will be required to make a request to RICS
for this. Exclusions vary dependent upon insurer; however,
from 1 May 2021 any exclusion will not apply to professional
work relating to buildings four storeys or under
* Maximum levels of uninsured excess
* Run off cover
* Policy should cover past and present employees / directors /
partners
Minimum limit of indemnity:
* Turnover £100,000 or less £250,000
* Turnover £100,001 to £200,000 £500,000
* Over £200,000 turnover £1,000,000
What is the purpose of having PII?
- Ensures that if the firm faces a claim, it is protected from financial loss that it cannot meet from its own resources
- Protects the insured member or firm against the consequences of its liability to pay damages to third parties for breaches of professional duty that it commits through its professional activities
- Ensures that the firm’s clients do not suffer a financial loss that the firm cannot meet.
What was the Hart v Large case?
Dispute between the purchasers, Mr & Mrs Hart, and their surveyor, Mr Large.
Mr Large had been instructed to provide a Level 2 HomeBuyer report on a newly refurbished property in Devon.
Mr Large reported minor issues and valued the property at £1.2m. Mr & Mrs Hart proceeded to purchase the property at this figure. Following the purchase, Mr & Mrs Hart experienced problems relating to water ingress and damp.
They initiated a negligence claim against Mr Large.
Mr Large was found to be negligent as his inspection and report failed to identify the significant issues relating to damp.
Mr Large also failed to advise that Mr & Mrs Hart obtain a Professional Consultant’s Certificate (PCC) prior to purchase.
How were damages applied in the Hart v Large case?
The normal rule of applying damages was established in the case of Watts v Morrow providing damages to be assessed on the difference between the surveyor’s valuation and the value of the property.
However, in Hart v Large, the Court diverged and awarded to be £750,000, taking into account a relatively high sum of £15,000 for inconvenience and distress.
The amount was reduced to £374,000 taking into account out-of-Court settlements with the conveyancing solicitors and architect.
How did the decision in Hart v Large affect PII?
