PI Insurance

Question 1

Tell me about the Merrit and Babb Caselaw

Answer 1

1. Case dates back to 2001 and highlights the importance of having run
   run-off cover in place.
2. A surveyor was sued for negligence by a former client.
3. Surveying firm was no longer in existence therefore the individual surveyor was pursued for damages successfully.
4. Caused a big shock in the industry and highlighted the need to ensure that run
   run-off cover is in place for all previous employees.

Question 2

What are the limitation periods for PI Insurance?

Answer 2

6 years when executed under hand.
12 years when executed as a deed

Question 3

What is the purpose of PI Insurance?

Answer 3

To provide financial cover in the event a client suffers financial loss as a result of a breach of professional duty e.g. neglect, errors or omissions.

Question 4

What is the required ‘claims made’ basis?

Answer 4

The insurance policy that is in place at the time the breach is discovered is responsible for providing
the indemnity, not the insurance policy in place when the breach was made.

Question 5

What are RICS requirements for PI Insurance?

Answer 5

1. The policy cover must be made on an ‘each and every’ claim basis.
2. The RICS sets out the minimum levels of indemnity.
3. The RICS sets out the maximum levels of uninsured excess.
4. The policy should include cover for past and present employees, directors and partners.

Question 6

What are the minimum levels of indemnity?

Answer 6

• FIRMS TURNOVER = £100K OR LESS = £250K

FIRMS TURNOVER = £100K -£200K = £500K

FIRMS TURNOVER = £200K + = £1M

Question 7

What is the purpose of Professional Indemnity Insurance?

Answer 7

To provide financial cover in the event a client suffers financial loss as a result of a breach of professional duty e.g. neglect, errors or omissions.

Question 8

hat benefits does it provide for the professional?

Answer 8

• The professional is protected from financial losses.
• The firm does not have to meet the claim from their own assets and resources.

Question 9

What benefits does it provide for the client?

Answer 9

They are able to recover their financial losses.

Question 10

On what basis is it underwritten in the UK?

Answer 10

On a claims made basis.

Question 11

What does an ‘on a claims made basis’ mean?

Answer 11

The insurance policy that is in place at the time the breach is discovered is responsible for providing the indemnity, not the insurance policy in place when the breach was made.

Question 12

What are the requirements regarding Professional Indemnity Insurance set by the RICS?

Answer 12

• The policy cover must be made on an ‘each and every’ claim basis.
• The RICS sets out the minimum levels of indemnity.
• The RICS sets out the maximum levels of uninsured excess.
• Run off cover must be in place for at least 6 years.
• The policy should include cover for past and present employees, directors and partners.

Question 13

What is the RICS guidance note on PI?

Answer 13

UK Professional indemnity insurance requirements Version 9 with effect from 1st April 2022

Question 14

What does the RICS say about PI?

Answer 14

Firms must ensure that all previous and current professional work is covered by adequate and appropriate professional indemnity cover that meets the standards approved by RICS.

Question 15

What do you need to look out for on the PI insurance?