Professional Indemnity Insurance

Question 1

What is PI (Professional Indemnity) Insurance?

Answer 1

It protects from claims arising from errors or negligence in carry out professional activities

Question 2

What minimal level of PI is required for RICS regulated firms?

Answer 2

Based on turnover on preceding year

£250k (£100k or less turnover)
£500k (£100k - £200k turnover)
£1m (£200k+ turnover)

Question 3

What is meant by claims made basis? (PI Insurance)

Answer 3

You go to the insurer who is insuring you at the time of the claim not the insurer of the time of the negligent act

Question 4

What is run off cover?

Answer 4

Run off cover is a form of PI insurance that applied when a business or individual stops trading to provide protection for historic liabilities

Came about via merit and babb – case law

Question 5

When is run off cover required?

Answer 5

If C5 decide to cease trading they every individual chartered surveyor should get run of cover.

If you are a sole practitioner and cease trading

Question 6

What is the minimum amount of run off cover required by RICS?

Answer 6

6 years

However if you deal with contracts as a Deed it should be 12 years

Minimum wording policy requirements for consumer and and non consumer claims

Question 7

What is the aim of PI insurance?

Answer 7

• Protects clients from related financial loss that firm could not meet
• It protects firm from financial losses they could not meet

Indemnifies employees carrying out works for the firm

Question 8

What are the RICS requirements for PI policy?

Answer 8

each and every claim basis

RICS minimum policy wording or more comprehensive wording

minimum level of indemnity based on turnover in previous year

Maximum level of uninsured excess
turnover £10m or less - the greater of 2.5% of the sum insured, or £10k
turnover £10m and above - No limit set

Fully retroactive - claims made basis

Underwritten by an RICS listed insurer - see RICS website

Cover for all past and present employees

Question 9

Can insurers impose fire safety exclusions?

Answer 9

Insurers may impose a fire safety exclusion. Exclusions vary dependent upon insurer; however, from 1 May 2021 any exclusion will not apply to professional work relating to buildings four storeys or under

Question 10

What are the requirements of run-off cover?

Answer 10

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. The minimum policy requirements are:

For consumer claims minimum limit of £1m for 6 years

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 11

What is run off pool?

Answer 11

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.(more info on RICS website)

Question 12

What is meant by each and every claim?

Answer 12

Each and every claim cover means that the limit is payable in respect of each claim

Question 13

Maximum level of uninsured excess

Answer 13

turnover £10m or less - the greater of 2.5% of the sum insured, or £10k

turnover £10m and above - No limit set