Professional Indemnity Insurance

Question 1

1) What is professional indemnity insurance and why are RICS regulated firms required to maintain a certain level of professional indemnity insurance?

Answer 1

• Insurance which covers professional negligence or breach of professional duty.
• PII provides cover for legal costs and expenses associated with defending the claim and issuing compensation due to the claimant.
• In accordance with rule 9 of the RICS rules for firms, RICS regulated firms with ensure previous and current work is covered by adequate PII.

Question 2

2) What are the minimum levels of indemnity an RICS regulated firm must maintain?

Answer 2

The minimum level of indemnity is based upon the firm’s turnover from the previous year (or projected turnover if a new firm):

• Turnover of £100,000.00 or less - £250,000.00
• Turnover of £100,000.01 - £200,000.00 - £500,000.00
• Turnover of over £200,000.01-£1,000,000.00

Question 3

What are the maximum levels of uninsured excess on a professional indemnity insurance policy for a RICS regulated firm?

Answer 3

The maximum level of uninsured excess is based on the PII level of indemnity.
- Indemnity up to £500,000.00 - Greater of 2.5% of the indemnity or £10,000.00
- Indemnity over £500,000.00 - 2.5% of the indemnity

Question 4

What are minimum standards that a RICS regulated firm’s PII policy should meet?

Answer 4

• Minimum level of indemnity is maintained according to the firm’s turnover from the previous year.
• Maximum level of uninsured excess based on the PII level of indemnity is not exceeded.
• Policy is written on an ‘each and every’ claim basis (no limit to the number of claims in any one period of insurance, though each claim is limited to the indemnity limit).
• Policy is written on RICS minimum policy wording including full civil liability basis (provides cover for any liability which is not criminal in nature).
• Policy is written on a ‘claims made’ basis and so is fully retroactive (policy covers claim made during the period of insurance regardless of when the negligent act occurred).
• Cover for past and present employees.
• Run-off cover (recommended for six years).
• Unwritten by a listed insurer such as Howden.

Question 5

You are in the pub with your friend and he asks for advice, can you give it to him?

Answer 5

• I would politely decline to provide the advice as I do not have adequate professional indemnity insurance.
• However, I would direct my friend to the RICS ‘Find a Surveyor’ database to find a competent surveyor.