Ethics - Level 3

Question 1

What is professional indemnity for?

Answer 1

PI ensures that;

a firm is protected from a financial loss it can’t meet from it’s own resources in the event of a claim.

insures Members or Firms against consequences of liability to pay damages to third parties for breaches of professional duty

Ensures firms clients do not suffer loss they cannot meet

Question 2

What is the minimum level of indemnity cover needed?

Answer 2

PII needs to meet RICS min policy wording using RICS recommended firms and is based on the firms turnover in the preceding year

Turnover - £100,000 or less. Minimum limit of indemnity - £250,000

Turnover - £100,001 to £200,000. Minimum limit of indemnity - £500,000

Turnover - £200,001 and above. Minimum limit of indemnity - £1,000,000

Question 3

What is run off cover?

Answer 3

To 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

Question 4

What is level of cover required?

Answer 4

For consumer claims

For a consumer (any natural person acting for purposes outside their trade, business or profession) claims, the requirement is for a limit of £1,000,000 in all for a period of six years from the expiry date of the policy in force at the time of cessation. RICS’ minimum policy wording will automatically provide this coverage.

RICS members may deem that it is adequate and appropriate for run-off for consumer claims to be an on an ‘each and every claim’ basis. RICS would expect run-off on this basis to be a maintained for a minimum period of six-years from the cessation of the practice. t may be
arranged and paid for on an annual basis, provided that in the event of the policy not being renewed, a minimum limit of £1,000,000 in all for a period of six years from the expiry date of the policy in force at the time of cessation is maintained.

For non-consumer claims

The requirement is for firms to have adequate and appropriate run-off, but RICS would expect run-off to be a maintained for a minimum period of six years from the cessation of the practice. Run-off for commercial activity may be arranged and paid for on an annual basis.

Question 5

What is a run off pool.

Answer 5

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 run-off Pool.