Fire safety – at last, some welcome news for surveyors
We set out below news of a welcome change to the professional indemnity insurance available to surveyors relating to their fire safety work.
The last 18 months have been a turbulent time for both professionals and homeowners and not just because of the pandemic. The market has been locked whilst mortgage companies, insurers and surveyors have been grappling with the issue of fire safety for multi-occupancy residential buildings in the wake of the Grenfell tragedy.
It is imperative that professionals have adequate and appropriate insurance cover for the work they undertake. However, the uncertainties relating to fire safety and the evolving legislation have resulted in many insurers placing exclusions on their policies, meaning that many firms have been unable to provide advice on properties with fire safety issues due to a lack of available insurance. Due to the "claims made" nature of PI policies, this has also left firms uninsured for work they had carried out at a time when they were insured for fire safety risks.
We have previously explained some of the changes put in place by RICS to try to unlock the market (please click here for more information). We have also been advising RICS on disclaimers that professionals can use to minimise the risk of claims, for the benefit of both the professionals and their insurers.
Changes to Minimum Terms
After the last changes to the Minimum Terms came into effect in May 2020, a number of insurers imposed a blanket ban in their PII terms on all fire safety work undertaken by surveyors. This left many surveyors exposed and uninsured in relation to their fire safety services, past and present. On 1 April 2021, the RICS new Minimum Policy Wording came into effect. We believe the new policy terms will be a welcome change to those previously unable to obtain fire safety cover.
The new minimum terms now confirm that, although fire safety exclusions will still be permitted in PI policies, "any exclusion will not apply to professional work relating to buildings four storeys or under". This follows the March 2021 Guidance Note issued by the RICS on the valuation of properties in multi-storey, multi-occupancy residential buildings with cladding.
The RICS has confirmed on its website that "Under the new terms, insurers are not permitted without specific dispensation to exclude fire safety claims on a property four storeys or less and fire safety coverage must be provided as a minimum on an aggregate, defence cost inclusive basis".
Whilst this means that uncertainties still surround the possibility of carrying out professional work on properties over four storeys, this change will significantly open up the market and assist professionals advising on buildings such as schools, which previously may have been without cover.
This specific change comes into effect for Insurers on 1 May 2021 and means that surveyors will be able to advise on properties of four storeys or less with the requisite cover in place.
RICS has confirmed it is continuing to work with the Government and industry to identify practical solutions for the surveying profession when advising on properties which are over four storeys. RPC continues to assist and advise in that process.
For firms seeking renewals, it is important to liaise with your broker to ensure you obtain sufficient cover. One of the key steps is to seek renewal terms well before the deadline, to ensure you have adequate time to seek terms and to reassure potential insurers of the risk management processes you have in place to reduce your potential exposure to claims.