Professional Indemnity insurance (PII) Flashcards
- What is PII
This is an insurance policy that covers the policyholder for the costs of legal action made against them in respect of financial loss which occurs due to negligence, error or omission in professional advice or services provided.
- Has the RICS published information on PII requirements?
Yes – UK professional Indemnity Insurance Requirements – Version 9 with effect of 1st April 2022
- What is the purpose of having PII?
o Ensures that if a firm faces a claim it is protected from financial loss that it cannot meet from its own resources.
o Protects the member or firm against the consequences of its liability to pay damages to a third party for breaches of professional duty that it commits through its professional activities and
o Ensures that the firms clients do not suffer financial loss which the firm cannot meet.
- What is the difference between “any one claim” and “aggregate” polices?
“Any one claim” polices provide cover up to the full limit for each individual claim that is made in the period.
Whereas an “aggregate” policy provides cover up to the full limit for all claims that are made.
- Tell me about Merrett v Babb (Court Case in 2001?
o Babb completed a valuation as an employee of a company for a house purchased by Merrett
o The valuation was later found to be negligent
o The original company no longer existed and the PII policy had been cancelled
o The court ruled Merrett could pursue the individual (Babb) for losses.
- What are the minimum limits for indemnity (for regulated firms)
- What is the maximum level of uninsured loss for a regulated firm?
- What measures do you take to avoid a PII claim?
o Keep full and detailed records or meetings and conversations
o Record recommendation and advice given
o Use proper letters of engagement, appointment contracts and follow the scope of services
o Do not advise on specialisms outside of my field of experience/knowledge
o Avoid excessive workloads
o Follow RICS rules of conduct
o Follow company procedures
- If you make a mistake, what would your insurance company expect you to do next?
- Notify them ASAP
- Comply with any conditions and procedures set out in the insurance policy
- Advise the client of the error
- Assess the level of mistake and take steps to correct it
- If you make a mistake, what would your insurance company expect you to do next?
- Notify them ASAP
- Comply with any conditions and procedures set out in the insurance policy
- Advise the client of the error
- Assess the level of mistake and take steps to correct it
- Assuming you are MRICS, how would you deal with the following situation. A friend asks for your help on a private house extension, they ask for technical advice, for free, outside business hours?
o My firm PII would not cover me for private advice, therefore I would politely decline
o I would also need to consider a potential CoI situation (working for a friend)
o I would suggest my friend contacts the firm I work for, in business hours to discuss the commission.
- What is PII run-off cover?
Run-off is a form of PII which cover the historic liabilities of a business after it ceases to trade. Any claim made under the policy will relate to work carried out before trading stopped (the policy covers legacy issues)
- How long should run-off cover be in place?
RICS expect run-off cover to be maintained for a period of 6 year from the cessation date of the practice or 12 years if Contracts have been signed underhand. In certain circumstances 15 years is required to allow for an claims made outside of the 12 year period (but capped at 15 years) due the statute of limitations for these claims.
