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relevant activities – this will only stretch so far. Guest says insurers are“unlikely to cover you for a claim relating to an entirely new activity that you hadn’t disclosed”. A final area that surveyors must address is run-off cover: insurance for claims made after the company has ceased trading. If you retire or close your business, “your work remains in play, so you still need a live policy”, says Creasey. RICS recommends that you cover your work for at least six

“Some firms are paying as much as 25% of gross fee income for their PII, which can have a major bearing on profitability” NICHOLAS ABBOTT XL Catlin years. Creasey is concerned that not all surveyors are making adequate provision, which could have serious consequences. London warns: “If run-off cover is not purchased, the individual could open themselves to being held personally liable for any claims which may arise.” The good news is that, once you put runoff cover in place, it tends to cost a decreasing amount each year. Cover is usually bought on a yearly basis. It may be possible to buy a policy that covers three to six years, but this is increasingly rare in today’s market. Managing PI risk, then, is not simply a matter of buying a policy. It is crucial that you do everything possible to limit your liability, minimise the risk of claims and prepare well for the years ahead.

VALUABLE LESSONS There is useful advice for valuers in RICS’ report: Balancing Risk and Reward: Recommendations for a Sustainable Valuation Profession in the UK. The report explains that regulations put the onus for assessing the value of the property on the valuer:

“Valuers should therefore carefully examine the contract offered to them … and seek to limit their third-party liability.” RICS standards must also always be followed: “Comply with Red Book requirements,” says XL Catlin’s Nicholas Abbott, because these are what “a court will use as a benchmark when assessing the competency of a surveyor’s conduct”. Read the report, and get much more advice for valuers, at the Small Business Hub. Go to and click on “PII and valuation guidance”.

Defining a ‘duty of care’ KEVIN ANDERSON Construction specialist, Sintons

When a surveyor signs a contract in the UK, they can also be imposed with a “duty of care”. It depends on the terms agreed with an employer, but a typical expression of a surveyor’s duty of care might be that they will exercise the reasonable skill and care of a qualified person performing a similar role on a project of similar size. Do surveyors owe any wider duty? Beyond a surveyor’s contract is the law of negligence, which is a legal yardstick against which all professionals are measured. This is an objective standard, and three essential components have to be considered: do you owe a duty of care to the other person; have you fallen short of – in other words, breached – that duty of care; and has the other person suffered loss or damage as a result? How can we know if the duty of care has been breached? It essentially boils down to: what would your peers have done? A surveyor is judged on whether what they did fell within the range of reasonable responses that their peers would have given in similar circumstances. The surveyor would not be in breach if they find themselves positioned at the bottom of that range, as long as they are within that range. However, surveyors should take care over the

terminology used when agreeing to any higher standard: for example, “diligence” requires your careful and persistent effort, and “best endeavours” obliges you to do everything possible, no matter the cost. Both of these may be difficult to deliver and difficult to insure. What liability is there for a breach? If the duty of care has been breached, it is advisable to accept the employer’s “reasonable” losses: accepting an “indemnity” makes you pay every single item of loss, no matter how remote or absurd. Surveyors often fall foul of their insurers if they offer an indemnity, as their insurance will only cover reasonable losses. Can anyone but my employer sue me? In contract law, yes; if the contract intends to give rights to the third party. Contracts often seek to exclude third-party rights. A collateral warranty to a third party also creates an express contractual relationship. In negligence, also yes; if you owe a duty of care to the other person. You might use specific exclusion wording. For example, state specifically what the report is being prepared for to exclude other purposes, or express that the report is prepared solely for your employer’s benefit to exclude third parties. Obviously, the best way to avoid a claim is to not breach your contract or your duty of care. Putting that into practice, however, can be much more difficult. JUNE 2016_MODUS


RICS Modus, Global edition — June 2016  

#RICSModus, June 2016 — the CASH issue. In order to keep global warming to below two degrees, the built environment sector needs to reduce i...

RICS Modus, Global edition — June 2016  

#RICSModus, June 2016 — the CASH issue. In order to keep global warming to below two degrees, the built environment sector needs to reduce i...