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"RICS is extremely concerned about the practice of speculative claim letters being sent to property valuers on behalf of banks. For this reason, a working group has been established to assess the problem and create a set of recommendations for our members and the wider public, aimed at tackling the issue.
The proposals have now been drafted and we are interested in hearing from RICS members, or those who have experience and understanding of the issue, in relation to the recommendations. We will be publishing the final report early next year with a view to tackling this problem, which is putting the valuation profession and public protection at serious risk."
Quote Robert Peto, RICS Spokesperson
RICS has today launched a consultation to tackle problems about current risk and pricing in professional indemnity insurance (PII) in the UK valuation sector that are creating market dysfunction.
Read full article
RICS Website
1 December 2011
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The annual Hammond PI challenge trophy was held at Bromsgrove Gold Club on Thursday 13 October 2011.
This year’s winner with a Stableford score of 39 was senior golfer Bill Webber from Sutton Coldfield in the West Midlands. Runner up with a score of 37 was Philip Richardson from Newton Regis in Staffordshire who narrowly squeezed into second place on a count back. A great day was had by all the competitors who all agreed that the course was very good but also that the pre match breakfast was just spectacular, well done Bromsgrove Golf Club.
The venue for next year’s match has yet to be decided but we hope it will be as enjoyable as this year.
May I thank all those who took part this year event, I look forward to seeing you all again in 2012.
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I was again today asked by a client, about the liabilities imposed on employees and professionals and in particular with regard to the ongoing liabiltes after the closure of a business. More often than not the question has been asked following someone hearing about the case of Merrett v Babb which was heard in the courts in 2001. I have set out the basis of this case below.
In 1992, a firm received instructions from a building society to inspect a property and to prepare and submit a mortgage valuation report based on that inspection. Mr. Babb carried out the inspection on behalf of the firm, where he was employed as a branch manager. Although Mr. Babb framed his report in the first person plural (i.e. on behalf of his firm), and a continuation sheet was written on the firm’s stationery, he gave the personal statement required by the Building Societies Act and signed both the pro-forma sheet and the continuation sheet, adding his own name and professional qualifications. The firm’s principal was made bankrupt two years after the report in question was prepared. Following this, the firm’s indemnity insurance cover was cancelled without run-off cover. After having bought the property, Ms Merrett had reason to find the valuation report was negligent and she sought redress from Mr. Babb as the signatory of the report. Mr. Babb accepted that the purchaser would place reliance on his report but argued that any duty he owed was to his employer and not to the purchaser, and that the latter had in fact relied on the report of the firm and not himself personally. The key question to be resolved, then, in the course of the judicial process was whether Mr. Babb, as an employee of the firm which had been engaged to carry out the required work, owed a direct duty of care to Ms Merrett. It was held that Mr. Babb was indeed the professional person on whom the purchaser relied to exercise proper skill and judgement. This was despite the fact that no reference to Mr. Babb was made in the mortgage report supplied by the building society to the purchaser.
The RICS have published a webpage “Chartered surveyors in employment” which provides very useful reading on the subject of employees liability including directors of limited companies and those working in partnerships.
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The FSA are expected to set out its final proposals in May of this year to increase the amount of protection offered by the FOS by raising its award Limit.
The proposal has sparked concerns that professional indemnity insurance premiums will rise as a result bringing yet more cost on advisers.
The FSA is expected to confirm the Financial Ombudsman Service’s new award limit is to rise from £100,000 to £150,000.
The regulator first floated the increase in a discussion paper on consumer complaints in March 2010 and published the proposal formally in a consultation paper on complaints handling in September 2010. We will be watching developments closely and will bring you comment from the Professional Indemnity industry as we get them.
David Hedgecock
Hammond Professional Indemnity Consultants
25 March 2011
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In October 2010 and as part of its commitment to protect the public interest and to raise the standards its members work to, the Royal Institution of Chartered Surveyors (RICS) has launched a new registration scheme for members undertaking valuation work. The RICS Valuer Registration Scheme.
Whilst the scheme was launched in the 20 October it will become mandatory in the UK from 30 April 2011. This will apply to all RICS members providing valuations in accordance with the RICS Valuation Standards (the Red Book).
The RICS Rules require members to ensure that all valuation work carried out is covered by adequate and appropriate professional indemnity insurance.
On what basis must cover be held?
For a policy to comply with the RICS Rules in the UK then it must meet the following criteria:
- Be underwritten by an RICS listed insurer
- Incorporated RICS minimum policy wording
- Be retroactive for at least 6 years, or to the date your firm began trading if this date is less than 6 years ago
- Have a level of indemnity of at least £250,000 (highest levels are required in the firm’s turnover is over £100,000. If turnover is between £100,001 and £200,000 then the amount increases to £500,000 and to £1million if turnover exceeds £200,000)
- The limit of indemnity should be on an each and every claim basis
- Uninsured excess of a maximum of 2.5% of the limit of indemnity or £10,000
For firms in the UK: ‘Each & Every and Any on claim’ is what is accepted under the minimum terms of adequate and appropriate Professional Indemnity Insurance. Aggregated cover will only be considered as adequate and appropriate where there is a ‘round the clock’ reinstatement on the policy, which is only usually found on indemnity policies in excess of £2m with a layered PI policy. Therefore this is not standard and must be brought to the attention of the RICS
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The Royal Institute of Chartered Surveyors, RICS, published its update list of “Listed Insurers” on 1st October 2011. The RICS issue a list of insurers who have obtained listed status by meeting a number of prescribed criteria. RICS Members are required to purchase Professional Indemnity Insurance cover from one of the listed insurers and must obtain cover on a policy wording stipulated and worded in line with a policy wording agreed between the RICS and the insurance industry.
The criteria used by the RICS in compiling its list of insurers include the insurers authorised or recognised status, their credit rating status, their agreement to write their policy in line with certain agreed contract terms and on a no less comprehensive basis than the RICS policy wording. Insurers must also be listed for the purpose of the assigned risk pool which is a insurance option of last resort for surveyors who are unable to obtain PI in the open market.
Whilst a PI Insurers policy wording does not need to mirror, word for word, the RICS template, it does need to duplicate the policy conditions as well as being on an any one claim, civil liability basis. For more information about the required coverage’s and minimum required RICS limits please go to our surveyors page.
A copy of the minimum wording can be viewed on the RICS web site.
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Those without Director and Officers Insurance and those whose policies don't provide cover for Corporate Manslaughter should take note of the resent comments from the Lord Chief Justice following the Court of Appeal has refused leave for Cotswold Geotechnical to appeal against their conviction and sentence for Corporate Manslaughter. Cotswold became the first company to be convicted of Corporate Manslaughter in February 2011 and were fined £385,000. They sought leave to appeal on the basis that a fine of more than their annual turnover was excessive and that their Managing Director’s unavailability due to illness had prevented a fair trial.
The Lord Chief Justice found no grounds for criticising either the way in which the trial had been conducted or the level of the fine imposed. The sentencing guidelines recognised that sometimes the appropriate level of fine might force a company into bankruptcy. To impose a fine of less than the annual turnover would have resulted in a ludicrously small fine for such a serious offence.
David Hedgecock
01 July 2011
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The Supreme Court last week delivered a landmark decision in the case of Jones v Kaney, effectively abolishing the immunity previously afforded to expert witnesses from claims for negligence arising out of evidence prepared for the purposes of, and in connection with, legal proceedings.
Insurers will need to consider carefully the potential ramifications of this decision. In particular, they will need to monitor new claims notified and resulting from expert witness work (hitherto considered by insures as low risk in view of the immunity previously in place).
Insurers will need to consider the impact this ruling may have with regard to the pricing of Professional Indemnity Insurance policies for those who work in these areas. Insurers may wish to consider whether to exclude expert witness work from standard professional indemnity policies, and then to write it back in where necessary, possibly via a specific endorsements to cover such work and with an extra premium payable, depending upon the Insurers perceived risk.
David Hedgecock
Hammond Professional Indemnity Consultants
5 April 2011
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When clients select a professional team or contractors select design subcontractors, it is important that each of them carry a level of professional indemnity insurance appropriate to the size of the project and that clients specify in the contract the minimum level of professional indemnity insurance they are to maintain. Most clients or contractors will routinely check at the time of appointing the team that it has the required insurance in place. However, what is sometimes overlooked is that the obligation continues for the entire period - usually 12 years - of the consultant’s or subcontractor’s potential contractual liability for their work on the project.
How many clients continue to monitor that the cover is kept up once the project is complete? And more pertinently, when renegotiating a cheaper deal in conjunction with their broker, how realistic is it for consultants or subcontractors to remember the level of cover needed to maintain sufficient cover for projects completed more than 10 years ago?
Read Article
Building.co.uk
25March 2011
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As lenders count their losses from the recession, 2011 could be the year that the number of lawsuits against property valuers explodes
Property is heading for another boom. But rather than yachts and champagne, this boom would be characterised by legal letters and court visits.
Professional negligence claims in the High Court have risen 130% from 147 in 2008 to 339 in 2009, Ministry of Justice figures published in December show.
Claims against surveyors and estate agents rose from one to 17 over that period. The hardest hit area is valuation, in an eerie echo of claims that soared after the late-1980s boom.
Property Week
4 February 2011
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