In the second of our series of articles looking at how and why professional indemnity claims against RICS members arise, Marcus Elwes examines the underlying reasons for such claims.

RICS listed insurers (ie. the insurers qualified to provide professional indemnity insurance for RICS members) have identified a number of the principal underlying causes of claims, which can be categorised into the following six areas.

The working environment
These are factors arising out of the social and economic environment in which RICS members work and that are, to a large degree, outside their control.

These include:

• the legal framework in the UK, which imposes a high duty of care
• the growing ‘compensation culture’, as consumers become more aware of their legal rights and entitlement to compensation arising from mistakes made by professionals
• the high expectations of clients (eg. expecting every detail to have been checked and/or perfect work to have been carried out by the surveyor).
• the lack of any other viable recovery option for clients who suffer a loss, leaving the surveyor as the only potential target, regardless of negligence
• a system that allows a valuation carried out for one party (the lender) to be used by another party (the lendee) to pursue a claim against a surveyor
• unforeseeably litigious or vexatious clients.

A poor audit trail
One aspect mentioned by almost all insurers responding to the review carried out for RICS by Miller Insurance Services – and which is more within the control of the surveyor – is a failure to put together and maintain adequate records.

Specifically, this includes failure to take proper and accurate notes, to make records of advice given and instructions received and to attend to, check and verify details and inaccuracies (eg. in sales particulars).

All these can leave a file incomplete and would give insurers little chance to successfully defend a negligence claim.

Lack of expertise or resources
Insurers’ comments in this area were aimed not so much at members having insufficient expertise, but at not having relevant expertise – for example, working outside their geographical area of knowledge, on non-standard properties, or ‘dabbling’ in activities where they have insufficient knowledge and experience (architecture was mentioned specifically on this point).

Also mentioned by a number of insurers was excessive pressure of work, which pushed surveyors to undertake too much work and, as a consequence, not have the time or other resources to carry them out economically and/or with a sufficiently high level of accuracy.

This is sometimes exacerbated by a reluctance to delegate.

Portfolio valuations were highlighted specifically as an area where insurers believe that surveyors felt pressured into undertaking work without necessarily having the relevant expertise or resources.

Lack of up-to-date relevant training or ongoing background research were also raised by insurers as contributing factors, as was, occasionally, just plain getting it wrong.

This highlights the importance of surveyors undertaking the required amount of continuing professional development (CPD) each year.

Lack of communication
Poor, or even a total lack of, communication, delays in responding to clients and general misunderstandings obviously all contribute to increasing the likelihood of disputes and the incidence of negligence claims as a consequence.

Poor management
Likewise poor management, including failure to monitor progress or to ensure staff are adequately supervised or trained, failure to control sub-contractors, and failure to avoid conflicts of interest and to vet bad clients were cited by insurers as contributing to claims.

A number of the issues highlighted above (poor delegation, pressure of work, lack of resources, bad communication, etc.) can also be categorised under the wider area of poor management.

Poor management was mentioned a number of times by insurers, specifically in the areas of property and project management.

Lack of documentation
Another commonly cited cause of claims is lack of contractual documentation – in particular, terms of engagement, briefs and limitations of liability.

Also, failure to stick to briefs (and one’s own internal standards and procedures), and failure to highlight to clients what will and will not be done (for example what areas have not been inspected during surveys) were all mentioned as contributing to disputes.

Finally, some insurers felt that the ambiguity in the current homebuyers’ report as to what does and does not need to be covered contributed further to the likelihood of disputes and the incidence of negligence claims.

Marcus Elwes is a consultant for Miller Insurance Services, which provides management and consultancy services to RICS.

Look out for the subsequent articles on professional indemnity claims in RICS Business, providing tips and hints from listed insurers on how to avoid a claim being made against you.

This article appeared in RICS Business, July/August 2006.