PI Insurance

Question 1

What is meant by the term negligence?

Answer 1

Failing to provide the duty of care that is owed to a client and can cause loss or damage.

Question 2

What is Professional Indemnity Insurance?

Answer 2

-Covers firms, the firms employees financially in the event of a claim of negligence if the firm cannot cover this internally.
- It also protects clients, so that they do not have financial loss if the firm cannot pay

Question 3

What does PII cover?

Answer 3

• The firm
• The firms employees
• Protects Clients

Question 4

What are the requirements for PI insurance?

Answer 4

There are 9:
- Each & every claim basis
- RICS minimum policy wording
- meet minimum limit of indemnity
- Maximum level of uninsured excess
- Fully retroactive - all former work carried out by the firm is covered
- Underwritten by an RICS listed insurer
- Cover for all past & present employees, for work carried out in its name or by those that leave the firm
- Run-off cover - protects members & clients if firm ceases to trade
- Fire safety coverage at a minimum (aggregate & defence cost inclusive basis)

Question 5

What is the minimum limit of indemnity for PI?

Answer 5

£100,000 or less = Minimum limit £250,000 cover
£100,001-£200,000 = Minimum limit £500,000 cover
More than £200,000 = Minimum limit £1,000,000 cover

Question 6

What is PI insurance based on?

Answer 6

Previous years turnover
Or anticipated turnover if it is a new company

Question 7

What is your firms PI?

Answer 7

£10,000,000

Question 8

What is the maximum level of uninsured excess?

Answer 8

• Up to and including £500,000 limit of indemnity = the greater of 2.5% of the sum insured or £10,000
• Over £500,000 = 2.5% of the sum insured

Question 9

How long do you need run-off cover for?

Answer 9

• Minimum 6 years when a firm is deregistering and ceasing to trade.
• 6 years from the date of a simple contract breach
• 12 years for contracts under a deed
• or 15 years as a long stop date

Question 10

What measures would you take to avoid PI claims?

Answer 10

• Keep detailed records of meetings
• Record recommendations & advice given
• Use proper letters of engagements & scope of services
• Use RICS guidance
• Avoid excessive workloads
• Don’t advice on specialism outside your field of experience

Question 11

If an estimate prepared by a QS was incorrect can the client claim damages?

Answer 11

• An incorrect estimate itself does not provide the client with right of redress
• Must prove that the QS warranted accuracy / lack of reasonable skill and care
• might be due to market conditions or an item stated in their exclusions

Question 12

What would you do if a client asked you to advise on LADs?

Answer 12

• I would advise the Client that I am unable to give advice on this as it is outside my area of competence
• Needs to be an accurate pre-estimate of loss which therefore need to be calculated by the client

Question 13

What could you tell the client and LADs?

Answer 13

I could advise the client what they may need to consider such as loss of rental income

Question 14

Why would you not advise on LADs?

Answer 14

• Outside my area of competence
• Against rules of conduct
• I would not be able to calculate the losses to the client

Question 15

What is Run-off Pool cover?

Answer 15

• Where insurer does not provide run-off cover, RICS provides run-off pool cover
• Collectively underwritten by all RICS listed insurers
• Managed by Miller Insurance Services LLP
• All RICS UK registered firms are eligible to apply for it

Question 16

What is run-off cover?

Answer 16

• Is a form of PII for claims made against a firm once it has stopped doing business.