Insurance is an APC optional competency on the Quantity Surveying and Construction pathway, to be taken to a minimum of Level 2, for which candidates must demonstrate an application of knowledge and understanding, for example compiling cost data for an insurance claim. Insurance is also an embedded part of other core and mandatory competencies, such as Contract practice, and Ethics, Rules of Conduct and professionalism.
Every APC candidate and chartered quantity surveyor should be aware of the essential cover types and associated terminology. Thisarticle details professional indemnity insurance (PII), contractors' all-risk insurance, public liability and employer's liability.
Chartered surveyors are at risk of being sued by their clients or other parties that have a right of action, such as beneficiaries of collateral warranties or holders of third-party rights, in the event that negligent advice is given. A professional indemnity policy will meet any genuine claim, protecting the assets of the professional, their firm or both, while also providing funds to pay the claim.
Most construction policies provide 'losses occurring' cover, so where the insured event occurs during the policy period it will be covered. PII policies are, however, provided on a claims-made basis,covering the insured against a claim first made during the policy period, not when the event prompting the claim occurred. It is thus important that any insurance procured on this basis is maintained for as long as a legal or contractual liability may arise.
Under rule 9 of the Rules of Conduct for Firms, RICS requires all practising firms or professionals to have PII cover. Run-off cover is also then required once the firm or professional ceases trading, to cover the duration of liabilities: six years for a simple contract made under hand; 12 years for a deed. Note that new requirements for PII run-off cover come into force in 2019.
Contractors' all-risk or contract works insurance is needed to respond to damage to the works before completion. Such policies are commonly procured on a joint-names basis, with employer, contractor and, if appropriate, subcontractors insured together.
Most building contracts require public liability cover as well, to protect against claims in the event a person or persons is injured or killed and to reinstate damage caused to third-party property. Professionals and firms are advised to carry such cover, even though the risks of harm and damage are lower than for a contracting organisation; the contract will dictate whether this is required. Employers must under the Employers' Liability (Compulsory Insurance) Act 1969 also insure employees against bodily injury or disease arising out of and in the course of their employment.
In all cases, the policy cover limit or insured sum must be appropriate. If too low, the insured party will be exposed to the risk of uninsured losses; if too high, unnecessary capacity is being bought. Policies also usually have an excess or deductible, a proportion of the loss that the insured must meet for each claim.
While specialist advice should always be obtained, the chartered surveyor should feel confident in understanding which insurances apply to their practice and to their client's business requirements.
Andrew Smith FRICS is director of Andrew D Smith Ltd email@example.com
Related competencies include: Contract practice Insurance