Ethics - Professional Indemnity Insurance (PII) & Negligence Flashcards

Question

Tell me about Merrett v Babb

Answer 1

Valation surveyor conducted mortage valaution for a lender and his firm closed due to bankruptcy with no run-off cover. The house purchaser successfully claim against the surveyor personally Mr Babb was an employed surveyor who was sued personally following the bankruptcy of his employer. The firm's PII was cancelled and the claimant sued Mr Babb, rather than his bankrupt employer.

Answer 2

Mr Large was negligent in advice (i) the damp issue and failing to advice not proceed the purchase without a Consultant's Certificate and (iii) failing to recommend a full building survey. Take away: (i) must ensure have suitable experience before taking on an instruction; (ii) a surveyor must take reasonable steps to follow that trail, which may include recommending further investigations; (iii) RICS member should ask the owner/occupier if they have any guarantees/warranties for any repair and alteration work carried out where practical https://www.rics.org/news-insights/rics-home-survey-standard-and-hart-v-large

Answer 3

* Clear ToE * Ensure competent to undertake work * Make detailed notes and take photos. * Stay up-to-date with market trends and legislative changes. * Cap the professional liability excess on PII policy in ToE

Answer 4

Limitation Act 1980 - The legal action brought by the claimant may have been started outside the time limits imposed by the Limitation Act 1980 Building safety Act 2022 - https://www.highspeedtraining.co.uk/hub/building-safety-act/

Answer 5

During 2019 fire safety insurance cover was removed from the professional indemnity insurance market following the Grenfell Disaster, followed an increase in insurance claims with insurers applying blanket fire safety exclusions. - Many surveying firms were unable to obtain fire safety cover leaving them exposed on previously completed instructions and non protected for future work During 2020/21 the RICS worked with insurers to restrict blanket fire safety exclusions. The RICS agreed with insurers in May 2021 that fire safety exclusions could be used however these would not apply to work on properties with four or fewer storeys above ground level. - This is contained in the agreement that all insurers sign if they want to participate in the RICS insurance market. - Cover for completion of EWS1 forms remains excluded from RICS' policy wording - limited protection for professionals completing EWS1 assessments on a case-by-case basis at insurers' commercial discretion. Prior to 2024, RICS has not published separate PII Requirements Documents for the UK and of Ireland. From 1 July 2024, RICS requires listed insurers to provide PII cover for fire safety claims for professional services carried out in respect of buildings 5 storeys and above, or buildings over 18 metres, on the following basis: - Negligent act, error, or omission (rather than the full civil liability basis); - Applicable to professional services undertaken on or after 1 July 2024, meaning insurers will not assume liability for historic work before this date; and - Cover can be in the aggregate, with defence costs included in the limit of indemnity and the with the uninsured excess applicable to defence costs.

Answer 6

Accordingly the margin of error permitted by the Courts is only 1% 1% for measurment

Answer 7

Case law precedent refers to a margin of between 10% and 15% depending upon the facts. Singer and Friedlander v John D Wood & Co [1977] 243 EG 212 states that the margin of error can be 10% either side of a figure that can be said to be the right figure that a competent careful and experienced valuer arrives at after making all the necessary enquiries and paying property regard to the state of the market. In exceptional circumstances, the permissible margin could be extended to about 15% or a little more either way.

Answer 8

Some claims (by clients) are based on (i) breach of contract and (ii) others (by clients or third parties) are based on tort

Answer 9

Claim on contract – Time limits – Limitation Act 1980 s.5 - 6 years from the breach of the contractual obligation Claim on tort – Time limits – (a) The basic period under Limitation Act 1980, section 2 - 6 years from the date the claimant first suffers measurable loss or damage or (b) The latent damage rule under Section 14A - 3 years from the date the claimant gained knowledge of the material facts of the damage caused by the negligence. Subject to The overriding time limit under Section 14B(1) – 15 years from the date of the last alleged negligent act or omission Why 15 years? 6 years is the original - Increase 3 years – 9 years – acknowledge the time to deal with https://www.isurv.com/info/1367/negligence_in_valuations_and_surveys/9911/negligence_defences/3

Answer 10

* Breach of contract can only be claimed by parties to contract. * Third party can claim negligence even if they were not part of the contract if the professional fell short of the duty of care expected