Tuesday 3rd October
Surveyors Professional Indemnity Insurance – increased liabilities
Recent legislative changes and the impact of the economic downturn may present additional risks for surveyors in the year ahead. Increased liabilities introduced by The Building Safety Act 2022 and potential mortgage lender claims due to a downturn in house prices is driving many to reassess their professional indemnity insurance cover.
Choosing the right Professional Indemnity Insurance (PI) cover is an important decision that requires the advice of a specialist PI insurance broker. The cost of legal defence expenses can quickly run into tens of thousands of pounds to defend even an unjustified claim. The Royal Institute of Chartered Surveyors (RICS) requires its surveyor members to hold a minimum level of cover as a condition of chartered status.
PI covers:
- a breach of a professional duty of care or unintentional breach of contract
- unintentional breach of confidentiality or copyright
- loss of documents or data
Mortgage lender claims
Property prices have soared over the last couple of years. Nearly a third of homes in England and Wales sold for more than their asking price in 2021. However, the economic downturn sparked a downward trend in house prices, and it was recently reported that house prices have fallen for the fifth month in a row, resulting in a rise in repossessions. The latest Ministry of Justice data says that mortgage repossessions increased by 134% between October and December 2022 compared to the same period in 2021. Legal commentators speculate that these conditions could increase mortgage lender claims against valuation and conveyancing surveyors in late 2023/2024 as lenders struggle to recover their losses from repossession sales alone.
Extended liabilities under The Building Safety Act
The Building Safety Act 2022 (BSA) extended the limitation periods under the Defective Premises Act 1972, increasing the risk of claims against surveyors. This change means those designing, building and working on residential properties may face backdated claims. It’s important to note that the extension of limitation periods under Defective Premises Act (‘DPA’) claims applies to any, and all DPA claims, not just those relating to fire safety.
Since June 2022, the new limitation periods for DPA claims are:
• 15 years for claims regarding works completed after 28 June 2022;
• 30 years for claims regarding works completed before 28 June 2022.
In addition, there is a ‘one-year grace period’ (to 28 June 2023) for claims close to limitation when the BSA came into force. A further change brought in by the BSA is that DPA claims can now be brought in relation to defective work to existing premises (previously, the DPA applied only to new dwellings.
Valerie Lawrence, Head of Professional Indemnity, Kerry London, said:
“Now is an important time for surveyors to talk to an experienced professional indemnity insurance broker about what insurance protection is available. Taking steps to manage the additional risks and liabilities can help protect your business against costly claims in the future.
A Directors’ & Officers’ policy may be a more relevant source of cover. A good policy wording can offer protection to the individual director and potentially to the organisation in the event of an investigation or pre-investigation.”
The details of the secondary legislation under The Building Act have yet to be confirmed by the government, but surveyors can reassess their insurance provision to help protect against claims. These changes will be complex, and seeking advice from a professional indemnity insurance broker and organising insurance protection is an essential part of any business’s risk management strategy.
How can Kerry London help?
We have access to the entire Lloyd’s of London market and work with several different industries including those working in the construction-related professions architects, surveyors’ engineers, solicitors, insurance brokers, accountants, and consultants. We insure firms of all sizes, from SMEs to large organisations through our access to the Lloyd’s of London market.
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Kerry London is authorised and regulated by the Financial Conduct Authority. The company is a leading UK independent and Lloyd’s accredited broker, which means that we work with a wide range of niche and major insurers.
This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such or regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note, we have relied on information sourced from third parties, and we make no claims as to the completeness or accuracy of the information contained herein. You should not act upon information in this bulletin nor determine not to act without first seeking specific legal and/or specialist advice. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to the fullest extent permitted by law.
Categories: Professional Indemnity,
