RICS PII Minimum Terms consultation – last chance to have your say

RICS requires all regulated firms in the UK and Ireland to hold "adequate and appropriate" indemnity insurance which meets RICS' Minimum Policy Wording.   

After remaining relatively unchanged for 2023, RICS is reviewing its Minimum Policy Wording.  This comes due to "changing market conditions" and "an increased capacity within the market to write PII".  The proposed changes are aimed at protecting consumers and assisting firms in managing their liabilities.

As we have previously reported, it has been challenging for surveyors to obtain suitable insurance cover due to policy limitations and an increase in the cost of premiums.  RICS recognises this is in no small part due to well-documented fire safety incidents and exclusions for those with fire safety exposure.  Uncertainty in the market has also affected valuation firms.  However, it appears insurers have increased their surveyors PII books and have a new enthusiasm to write fire safety cover.  

Proposed changes

The consultation seeks views on changes to RICS' Minimum Policy Wording in respect of existing PII.  RICS has identified the following issues and propose three amendments:  

1. Fire safety exclusion

At present, the RICS Minimum Policy Wording (UK and Ireland) does not contain an exclusion for any form of Fire Safety.  RICS's Listed Insurer Agreement deals with Fire Safety.  Fire Safety exclusions were permitted from 1 April 2020 when RICS allowed a blanket dispensation following consultation with insurers.  RICS changed its stance in 2021 for buildings of four storeys or less.  Following engagement with insurers, it was not thought to be appropriate to remove the fire safety exclusion last year due to the Building Safety Act and the Defective Premises Act.  However, with insurers' increased understanding of exposure to these risks, RICS considers it time to revise the terms of its standard exclusions, whilst not removing them completely.  RICS therefore proposes a requirement for insurers to provide coverage for fire safety claims on buildings between 11 – 18 metres high based on:

• A negligent act, negligence error or negligent omission; and 
• Applicable to Professional Services undertaken on such building on or after 1 April 2024.
• Coverage for fire safety claims on buildings of 11 metres or less will remain unaffected.  

2. External Wall Assessments

As well as fire safety exclusions, RICS has also allowed insurers in the UK to exclude cover for surveyors completing EWS1 forms.  Since RICS published its guidance note in November 2022, lenders are requesting fewer EWS1 forms.  Developments since its guidance, including PAS9980, has led RICS to review and update its position.     

RICS proposes that the exclusion of cover for EWS1 forms in the UK, currently narrowly defined within 19.1 of the Professional Business within the Minimum Policy Wording which excluded Professional Business unless declared to insurers, should now be amended as follows:

• Delete the sentence “other than the completion of the EWS 1 (or as revised) unless specifically declared to, and agreed by, INSURERS” and revert to the definition of PROFESSIONAL BUSINESS in use prior to 01 April 2020, namely:

• “PROFESSIONAL BUSINESS shall mean: 19.1 “those services (including the giving of advice) provided to a third party, which are undertaken by members of the Royal Institution of Chartered Surveyors (or have otherwise been declared to INSURERS) and which are performed by or on behalf of the PRACTICE within the TERRITORIAL LIMITS”. And to instead clarify within the minimum policy wording that EWS1 and FRAEW should be covered for buildings up to 11 metres. For buildings between 11 and 18 metres, insurers may exclude EWS1 and FRAEW unless undertaken by, or signed off by, a successful completer of the RICS training programme (a Level 6, Ofqual accredited qualification).  

3. Cyber

In 2021, RICS incorporated a clause in its Minimum Policy Wording to allow for exclusions due to losses, costs or expenses resulting from a "cyber act".  This included investigations, containment/stopping it, remedy issues caused by it and compliance with notification obligations.  RICS proposes amending the cyber clause in accordance with the International Underwriting Association's model clause used by underwriters for other professional services policies.  Therefore RICS proposes deleting the following:

• Definition 6 Computer System;  
• Definition 8 Cyber Act; and 
• Exclusion 7 Cyber Act

The consultation in the UK and Ireland is open until 31 December 2023. 

The amendments will take effect on 1 April 2024.

Comment 

Act now by reviewing the consultation document here and completing the PII market consultation here.

For our previous article see: RICS PII market consultation – Is the feeling mutual? Have your say.