royal institution of chartered surveyors professional - Howden

royal institution of chartered surveyors professional - Howden

ROYAL INSTITUTION OF CHARTERED SURVEYORS PROFESSIONAL INDEMNITY POLICY SUMMARY THE FOLLOWING IS A SUMMARY OF THE KEY FEATURES, BENEFITS AND SIGNIFICA...

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ROYAL INSTITUTION OF CHARTERED SURVEYORS PROFESSIONAL INDEMNITY POLICY SUMMARY

THE FOLLOWING IS A SUMMARY OF THE KEY FEATURES, BENEFITS AND SIGNIFICANT LIMITATIONS OF THE LATEST VERSION (2011) OF THE RICS MINIMUM POLICY WORDING. RICS 'LISTED' INSURERS WILL EITHER USE THE RICS MINIMUM TERMS OR THEIR OWN VERSION OF THE MINIMUM TERMS. IRRESPECTIVE OF THE APPROACH TAKEN THE COVER PROVIDED MUST BE AS BROAD AS THE RICS MINIMUM TERMS. WHERE AN INSURER USES THEIR OWN WORDING THEY MAY INSERT A 'RICS DIFFERENCE IN CONDITIONS' CLAUSE. THIS ENSURES THAT THE RICS MINIMUM WORDING TAKES PRECEDENCE IN THE EVENT OF ANY UNFAVOURABLE DIFFERENCES IN CONDITIONS.

RICS 'Listed' Insurers are those insurers who have agreed to write RICS Regulated Firms' PI insurance on the basis of the minimum wording. All RICS Regulated Firms must purchase their primary £1m layer (or smaller) of PI insurance from a 'Listed' Insurer. Excess layers may be placed with a non RICS 'Listed' Insurer but this is rare. You will find the full terms and conditions of your cover in your policy wording. This summary is intended as a generic guide only so you should ensure that you understand your own cover, particularly those sections relating to the notification of claims and any policy exclusions. POLICY TYPE AND COVER PROVIDED The RICS minimum terms are categorised as a civil liability policy wording. This is a very broad insuring clause, which provides cover for any liability which is not criminal in nature. This would include, for example, breaches of professional duty, negligence, errors, omissions, defamation, liability for losses of client money, documents or data, nuisance, breach of confidentiality and copyright and breach of authority. Whilst the cover provided is very broad certain other civil liabilities which are usually covered under separate insurances, such as Public Liability, Employer's Liability, Directors' & Officers' Liability and Trustee Liability would be specifically excluded. The limit of indemnity chosen is provided on an "Any One Claim" basis. This means there is no limit to the number of claims which can be made in any one period of insurance, only a limit on the amount payable for each individual claim. For example, if you buy a limit of £500,000 you can make an unlimited number of claims in the policy year up to a value of £500,000 per claim.

Defence Costs are payable in addition to the limit of indemnity. This is sometimes referred to as a "costs in addition" limit, as opposed to a "costs inclusive" limit, where defence costs form part of the total amount payable by insurers. Defence costs are usually the cost of lawyers' fees incurred in defending the claims made (valid or otherwise) against you. So if you buy a limit of £500,000 and you are the subject of a claim which is settled at £480,000 with £60,000 of costs Insurers will pay out £540,000 less the policy excess. The policy is based on a "Claims Made" wording, which means that the policy covers claims first made against the Insured and notified to insurers during the Policy Period, irrespective of when the work to which the claim relates was carried out. For example, if the Insured firm undertook a Building Survey in 2008 and a claim arose in 2012, the Insurer providing cover in 2012 would settle the claim, not the insurer providing cover at the time the work was done. The policy includes specific cover for adjudication, arbitration and ombudsmen awards made against the Insured. The policy also includes a RICS benefit clause which waives insurers' normal rights to avoid the policy, in the event of innocent non-disclosure of information by you. Cover includes 80% of any costs incurred in defending proceedings alleging breach of statutory liabilities (for instance Property Misdescriptions Act 1991, Health & Safety at Work Act 1974, CDM Regulations, etc.) and also those incurred if you are called to attend regulatory hearings, tribunals or other proceedings which arise out of a claim made or circumstance notified. This former coverage is only available if

ROYAL INSTITUTION OF CHARTERED SURVEYORS PROFESSIONAL INDEMNITY POLICY SUMMARY

defence protects you from a subsequent claim under the PI policy. Penalties for such breaches are not recoverable under the policy, in the same way speeding fines cannot be under a motor policy. Whilst the policy contains a very broad definition of 'Professional Business; "those services (including the giving of advice) which are undertaken by members of the Royal Institution of Chartered Surveyors (or have otherwise been declared to Insurers) and which are performed by or on behalf of the Practice, "it is important to ensure that you fully disclose to insurers the activities your business is actually involved in. The policy includes various other extensions of cover specific to the Surveying profession, for example, any claim directly or indirectly resulting from the presence or release or possible presence or possible release of asbestos or asbestos containing materials in whatever form or quantity. You should however be aware that extensions are often provided with an 'inner limit' of cover meaning that the full policy limit will not apply. In the case of asbestos this 'inner limit' is £250,000 in the aggregate meaning that insurers will cover claims arising in the policy year up to a total of £250,000. Extensions of cover are often also restricted in the breadth of cover they provide, for example claims arising from asbestos do not extend to cover bodily injury or liabilities arising from asbestos surveys SIGNIFICANT AND UNUSUAL EXCLUSIONS OR LIMITATIONS As always, the RICS minimum terms contain exclusions and limitations. Some of the most important ones are listed below, however, you should familiarise yourself with all such exclusions and limitations of cover, as there can obviously be huge business implications to you if your PI policy fails to respond to a claim. The first amount of each claim for loss or damage (known as the "excess") is your responsibility to meet. The excess will be shown on the policy schedule. Defence costs are not subject to the excess, only indemnity settlements. The excess will vary from policy and often from discipline to discipline. Insurers may apply a higher excess to those activities that are deemed higher risk so a firm may have an excess that is shown as £1,000 rising to £10,000 in respect of

survey and valuation work. It is important to ensure when purchasing insurance that, in the event of a claim, the excess is affordable and that it complies with the RICS requirements which are as follows:

Policy Limit Up to and including £500,000

Maximum Excess The greater of 2.5% of the sum insured, or £10,000

Over £500,000

2.5% of the sum insured

So a firm purchasing a limit of £250,000 cannot carry an excess of more than £10,000. The policy will exclude any claim or circumstance or circumstances which might give rise to a claim:      

known to you prior to the inception of the Policy arising from the dishonesty of a person, after there is reasonable cause for suspicion arising out of express guarantees/fitness for purpose provisions within contractual agreements arising from work undertaken outside of the UK (unless the policy is extended) arising out of surveys or valuations undertaken by non-qualified or inexperienced persons arising from work undertaken prior to the Retroactive Date on your policy (see note below)

A RICS compliant PI insurance policy should not have a Retroactive date, unless it is the date of establishment of the Firm, if applicable. It is preferable that there is no Retroactive limitation on the policy. The term 'Retroactive Date' is often found in claims made policies. The 'Retroactive Date' refers to the date from which coverage for claims arising will be provided (subject to the restrictions imposed by law i.e. The Statute of Limitation). Please refer to the policy document for full details. The policy is governed by English Law. CANCELLATION RIGHTS There are no cancellation rights under the RICS minimum terms, as it is a requirement of the RICS that Regulated Firms have cover in force at all times, in order to ensure public protection.

ROYAL INSTITUTION OF CHARTERED SURVEYORS PROFESSIONAL INDEMNITY POLICY SUMMARY

CLAIMS NOTIFICATION One of the most important conditions of the PI policy is that insurers must be made aware immediately if a claim is being made against you or if you are aware of any circumstances which might give rise to a claim. Circumstances which might give rise to a claim could include for instance, discovery of an error which might later give rise to a claim, a complaint from a client about the quality of the services provided, a refusal to pay for fees due to a perceived dissatisfaction with the work done, mentions of compensation, etc. If you are at all unsure of whether circumstances have arisen which might give rise to a claim, please discuss with your professional advisor.

Such matters must be notified in writing as soon as possible. Notice of any adjudications must be notified within two working days. The party to be notified and address is shown in the PI policy schedule. This is a summary of the policy and does not contain the full terms and conditions of the cover, which can be found in the policy document. It is important you read the policy document carefully when you receive it. Howden Insurance Broker are the RICS preferred PII broker

For further assistance, please contact: Emma Vigus 020 7133 1570 [email protected] Greg Harrison 020 7133 1505 [email protected]

The Howden Professional Indemnity division is one of the UK’s most respected and experienced Professional Indemnity insurance (PII) broking teams. We have the expertise to look after businesses operating across a range of sectors and territories. We look after some of the UK’s leading firms operating in the Legal, Accountancy, Financial, Property and Construction sectors.

This document is intended for general guidance. It is not intended to apply to any particular case and does not constitute either legal or insurance advice. For further information please contact the author. October 2012.