All RICS-regulated firms need to have adequate and appropriate professional indemnity insurance (PII) in place that complies with rule 9 of our rules of conduct for Firms.
We're all familiar with purchasing motor, holiday, home contents and buildings insurance. In return for a premium, the insurance company will usually pay if a loss occurs within 12 months from the start date of these insurances.
Professional indemnity insurance, however, isn't written on the same basis. It's written on a 'claims made' basis, which means that when a claim is received the insurer in place will respond, rather than the insurer in place when the negligent act occurred.
For example, if a member was insured on 1 January 2000 for a period of 12 months with the XYZ Insurance Company, that company would, subject to the terms of the policy, meet and pay all claims that were made during that period, as a result of any surveying activity which the member had undertaken in the past.
If on 1 January 2001 the member were to change insurers and take out a policy with ABC Insurance Company, then that insurer will, subject to the terms of the policy, meet and pay all claims arising during the period 1 January 2001 to 31 December 2001.
If a claim were to arise in 2001 as a result of work undertaken by a member some time during 2000 it would be to the ABC Insurance Company that the claim should be made, rather than to the XYZ Insurance Company.
- Because of this 'claims made' basis, your policy will contain conditions that you notify insurers of all claims and circumstances as soon as possible. In respect of circumstances an RICS policy contains a special clause so that if you innocently fail to notify a circumstance (if you don't recognise it, for example) the insurers will not avoid the policy.
- Where you receive a 'claim' (a letter formally advising you of legal action, or an indication to the effect - for example, 'I'm going to sue you'), you must notify this to insurers as soon as possible. Where the requirement to notify falls towards the end of the policy it's vitally important that you notify before the policy expiry date. This is onerous on you but you should ensure your firm has systems in place to deal with this eventuality or you risk your cover being voided
Members changing insurers should be especially careful in not delaying notifying of circumstances or claims should any occur.
PII guidance and policy for RICS-regulated firms
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