Surveyors' PII Quotations: Pre-Acceptance Checklist

1. 

Have you provided a “fair presentation of the risk” to insurers?

Under the Insurance Act 2015 you owe a duty of disclosure to your insurer(s), which includes a duty to make a “fair presentation of the risk”. This is an ongoing duty and if any material circumstance has arisen since the submission of your proposal form, then you should discuss this with your broker so that insurers can be advised. Material information is any fact that senior management, including those responsible for managing insurance, know or ought to know following a reasonable search that “would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms.”[1]

When signing the Quote Acceptance section of Howden’s Quotation Form, you will note that it includes a declaration confirming that you have made a fair presentation of the risk, so it is important to reflect carefully on this issue.

2.

Have you notified all claims and circumstances?

Consistent with the duty of fair presentation, is the requirement to ensure that all claims and circumstances are notified to insurers in advance of renewal. The responsibility to make prompt notification of claims and circumstances is also covered in your policy. 

Many firms find it useful to send a reminder to fee earners at intervals throughout the year, prompting them to advise on any matters that should be reported. It is particularly important that this is done when completing the PII proposal form, as questions relating to the reporting of claims and circumstances are usually prefaced with words such as “after full enquiry of all principals, partners and employees in the firm”.

You must also revisit this issue when accepting your PII quote and you will notice that our Quote Acceptance form includes a declaration requiring the signatory to further confirm that “all claims or circumstances, or other incidents which could give rise to a claim under this insurance have been notified to Insurers”.

This issue is even more critical if you are changing insurers. If you are aware of a matter that amounts to a “circumstance” and you fail to notify it prior to the expiry of your current policy, then the matter will fall to your new insurer if there are developments that result in you making the notification. 

If you are ever in doubt about whether a matter should be notified, discuss the issue with your broker. At Howden we have a very experienced team that deals exclusively with surveyors PII claims and can advise firms in this situation.

3. 

Is the limit of indemnity “adequate and appropriate” for your firm?

Have you undertaken a review of the limit of indemnity that your firm needs? RICS set out that firms must take out, and maintain, professional indemnity insurance that provides adequate and appropriate protection in respect of current or past liabilities.

The RICS sets compulsory cover at a minimum of £250,000 for firms with income of £100,000 or less, £500,000 for firms with a total income of £100,001-£200,000 and £1,000,000 for firms with income above £200,000. However, this does not mean that such cover is “adequate and appropriate” for a firm. It could be, but this will depend on a range of issues and some firms will need significantly more cover.

4.

Are there any changes to policy terms that you need to be aware of?

All Chartered Surveying Members' PII policies must be consistent with the RICS Minimum Terms and Conditions (MTCs). It is easy to become complacent and adopt the view that you do not need to pay too much attention to the wording as the MTCs will always prevail in the event of any inconsistency. However we urge caution with such an approach.

For example, Howden’s own Surveyors PII Wording includes cover beyond that required by the MTCs. If you were to move to a more restricted wording sometime after, then the limitations brought by the new wording will need to be reviewed to ensure that previous agreements to maintain such cover are considered. Particularly with regard to Contractual Liabilities where the number of assignments of an appointment permitted may vary. 

You also need to be alert to any amendments to the MTCs that might have occurred in the last year. They have been arising more frequently over the last couple of years and on this point we refer you to our article in this edition of Valuation Matters, Surveyors: Updates to RICS PII Minimum Policy Wording.

If you are purchasing excess layers above a primary £1m limit, then in addition to checking whether there has been any change to the wording, also make sure you understand the terms of the cover under the excess layers, as there is no requirement for them to follow the MTCs.

Finally, if you are changing either your primary or excess layer insurers, it is again important to undertake a contrast and compare exercise to identify any differences to your existing policy that could be an issue.