Kerry London News

Surveyors Professional Indemnity Insurance

Wednesday 3rd May
Surveyors Professional Indemnity Insurance

Professional Indemnity (PI) is an important business insurance for surveyors with professional errors potentially costing clients thousands or even millions of pounds to remedy. Choosing the right PI cover is an important decision that requires the advice of a specialist insurance broker. The cost of legal defence expenses can quickly run into the thousands of pounds to defend 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 insurance provides financial protection for causing financial loss to the client due to either an error or oversight. PI covers legal costs and expenses involved in defending a claim and any compensation payments. Occasionally mistakes may happen, and PI insurance is a safety net that protects against the cost of a client alleging a financial loss for:   

  • a breach of a professional duty of care or unintentional breach of contract  
  • unintentional breach of confidentiality or copyright  
  • loss of documents or data

Understanding claims-made cover  

Surveyors’ professional indemnity insurance is sold on a claims-made basis, which means the insurer will accept claims made while the insurance policy is still active, not retrospectively after the policy has expired or been cancelled. It’s vitally important to ensure cover is renewed on time to ensure continuous protection and prevent exposure to the risk of litigation or compensation claims. It’s important to remember that a claim cannot be made once the PI insurance expires or is cancelled – even if the work occurred while the policy was active.

Changing insurers and the importance of retroactive dates  

Retroactive dates prevent gaps in cover when changing insurers. It’s essential to get a “retroactive date” for PI cover because it backdates the cover to before the start date of the new policy. This is vitally important in preventing the risk of claims made by clients, sometimes years after they’ve taken professional advice.

Run-Off cover for career breaks and retirement  

Run-off PI insurance also protects surveyors from retrospective claims. RICS surveyors must have a run-off period of up to 15 years to protect against potential legal action. Surveyors can face negligence claims even after death, sometimes up to 15 years after the work was completed.  

RICS Surveyor Insurance Requirements  

Rule 9 of the RICS Rules of Conduct for Firms states, “A firm shall ensure that all previous and current professional work is covered by adequate and appropriate indemnity cover that meets standards approved by the Standards and Regulation Board”. These include:  

  • A minimum limit of indemnity as set out in rule 9 depending on turnover  
  • Cover issued on any one claim or aggregate plus unlimited round-the-clock reinstatement basis  
  • RICS minimum policy wording (or more comprehensive basis) with full civil liability being a minimum required level of cover
  • Fully retroactive cover, including cover for past and present employees
  • Underwritten by a title

Fire Safety Coverage  

The RICS states that compliance with RICS rules of conduct will be determined taking into account “market availability of insurance cover for fire safety and advice received from the firm’s insurance broker”. Surveyors must keep records of any correspondence with insurance brokers regarding the suitability and extent of professional indemnity cover relating to fire safety claims.  

Managing renewals – what will my broker need to provide an insurance quote?  

The factors that will determine the cost of a surveyor’s public liability and professional indemnity insurance usually include the following:  

  • Types/levels of the survey provided   
  • Involvement in project management or design / non-traditional surveyor activities   
  • Claims history   
  • Business structure   
  • Turnover  
  • Size of contracts

Chartered vs unchartered surveyor insurance  

Insurers often provide a more comprehensive cover for chartered surveyors to meet RICS conditions, and sometimes this is a more comprehensive cover. RICS compliant policies are usually extensive and include additional protections not traditionally bundled with ‘non-chartered’ surveyor policies. This is something for non-chartered surveyors to consider because they can request an RICS suitable policy to ensure they’re protected with a fully comprehensive cover.  

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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.

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