What can go wrong?
Buildings, land and construction materials are valuable assets and problems with their physical condition or their estimated value can be expensive to rectify.
In times of recession especially, surveyors are vulnerable to claims for things like failure to notice structural defects, planning failure, errors made in calculating project costs or rent reviews, fraud and, of course, negligent valuation of property. The construction sector is increasingly competitive and litigious so there really is no margin for error.
Professional Indemnity insurance is compulsory for all surveyors who are members of the Royal Institution of Chartered Surveyors (RICS). The minimum requirements set out by RICS detail the level of cover practices are required to buy, based on their fee income. Approved insurers must offer cover on an each and every claim limit basis, provide a full civil liability wording and include innocent non-disclosure of claims. As a result of these broad minimum requirements, products from different insurers are roughly comparable but insurers will occasionally offer enhancements.
Run-off cover must be purchased for 6 years after a surveying practice ceases to trade.
Surveyors who are not RICS qualified may be offered cover on a non-approved wording.
What are insurers looking for?
A variety of factors including: the size of the practice, the qualifications and experience of professional and technical staff (unqualified staff may need to provide CVs), the areas beyond the immediate geographical vicinity in which work is undertaken and any pioneering techniques or technologies utilised by the practice.
Critical to how insurers assess the risks surveyors present is the split of fee income by activity. Areas they consider medium to high risk include: project management; land, mineral/hydrographic surveying (including setting out) and valuations for secured lending.
Details of highest and average contract sizes and the extent of services provided will be requested as they’re a good guide to worst case scenarios. Insurers will pay particular attention to any unusually large contracts and may seek reassurance that the practice was up to the job.
Surveyors who undertake (or have ever undertaken) any amount of valuations for secured lending purposes have a small pool of insurers to choose from as this area is vulnerable to fluctuations in the property market and has historically had an extremely poor claims experience. Firms that do any work in this area will undoubtedly need the services of specialist professional indemnity broker.