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What does PII stand for?
Professional Indemnity Insurance
What is the purpose of Professional Indemnity Insurance?
To provide financial cover in the event a client suffers financial loss as a result of a breach of professional duty e.g. neglect, error or omission
What benefits does it provide for the professional?
The professional is protected from financial lossDoes not have to meet the claim from their own assets and resources
What benefits does it provide for the client?
Can recover their financial loss
On what basis is it underwritten in the UK?
On a claims made basis
What does this mean?
That it is the insurance policy that is in place at the time the breach is discovered that is claimed under NOT the insurance policy in place when the breach was made
Tell me about Merrett v Babb?
Court case in 2001Babb had done a valuation as an employee of a company for a house purchased by MerrettValuation later found to be negligentThe original company no longer existedCourt ruled Merrett could pursue the individual – Babb – for the lossesBig shock in the industry
What is the significance of it?
Considered if a professional employer was vulnerable to claims brought directly against them for advice given on behalf of their employersHighlights importance of run off coverProfessional individuals and firms must ensure that run off cover is in place after they leave their firm’s employment or a firm ceases tradingIndividuals should ensure that their ex company keeps up this cover on their behalf
How long should run off cover be in place?
Depends on the type of contracts the professional has been involved withUsually 6 years if contract executed under hand12 years if executed as a deed
What are the requirements regarding PI by the RICS?
Must be made on an ‘each and every’ claim basisGives min wordingSets out minimum levels of indemnitySets out maximum levels of uninsured excessRun off cover must be in place for at least 6 yearsShould include cover for past and present employees, directors and partners
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