PII Cover

Question 1

What are the new RICS PII requirements?

Answer 1

• They were updated following issue of the UK professional indemnity insurance requirements version 9 with effect from 1st April 2022.
• It introduced a change to the maximum uninsured excess of professional indemnity insurance.
• For larger companies with a turnover in excess of £10m, there is no maximum limit of uninsured excess.
• For companies with a turnover of less than £10m, the max uninsured excess is the greater of £10k or 2.5% of the insured sum.

Question 1

What were the previous requirements for PII maximum uninsured excess?

Answer 1

• they were based on the level of indemnity cover provided.
• Therefore, for indemnity cover of £500k or less the max excess was the greater of £10k or 2.5% of the insured sum.
• For levels of indemnity cover over £500k the max excess was 2.5%
• these requirements have now been overhauled.

Question 2

What is PII Cover?

Answer 2

It is a form of insurance that protects you against claims for loss or damage made by clients or third parties as a result of the impact of negligent services you provided or negligent advice you offered.

Question 3

What is the purpose of professional indemnity insurance?

Answer 3

• To provide financial cover in the event a client suffers financial loss as a result of breach of professional duty
• The professional is protected from financial losses
• The firm does not have to meet the claim from their own assets and resources.

Question 4

On what basis is PII underwritten in the UK?

Answer 4

• On a claims made basis
• The insurance policy that is in place at the time the breach is discovered is responsible for providing the indemnity.

Question 5

What are the requirements for PII set by the RICS?

Answer 5

• 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 6

What limitation periods are in place in Under Hand and Deed forms of contract?

Answer 6

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

Question 7

What are the minimum levels of indemnity?

Answer 7

• Firms turnover £100k or less = £250k
• Firms turnover £100k-£200k = £500k
• Firms turnover £200k+ = £1m.

Question 8

What happened in Merrit vs Babb?

Answer 8

• This relates to a case dated back in 2001 and highlights the importance of having run-off (form of PII) cover in place
• A surveyor was sued for negligence by a former client.
• Because the surveying firm was no longer in existence therefore the individual surveyor was pursued for damages.
• This caused a big shock in the industry and highlighted the need to ensure run-off cover is in place for all previous employees.