Guide on Professional Indemnity by olk11775

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									                                                  Chapter Four


                               Guide to Insurance Law and Practice


                        Contents
                                Introduction – meaning of insurance
                                General principles of insurance
                                 - the proposal
                                 - parties to the contract
                                 - the claim
                                Professional indemnity insurance
                                 - insurance scheme facilitated through ACSIS.
                                 - the cover
                                 - determination of a claim
                                 - invalidation of cover
                                Useful tips for claims handling.

Introduction

Insurance is a contract that involves uncertainty as to the occurrence and repercussions
flowing from a specified event. Individuals/companies take out insurance cover to
compensate them should the event occur or take place normally during the duration of the
policy. However, professional indemnity policies typically cover claim events that
happened before the policy was taken out providing the claim arising from that event is
notified during the duration of the policy.1 An event in this context is a happening or a
circumstance, the outcome of which may be adverse to the interests of the insured.

Fundamental to insurance is the concept of indemnity. Most insurance contracts are
designed to protect the insureds where the claimant is able to recover the loss suffered
whether it is financial, real or personal property or compensation for general damages
such as trauma. A corollary of this is the principle that insureds, or other parties, are not
entitled to profit from the loss. Life insurance contracts are an obvious exception to the
indemnity principle, as the amount recoverable upon the maturity of the policy cannot be
measured against the insured‟s loss.

At common law, an insured was, in the past, required to have an insurable interest in the
subject of the insurance policy in order to be entitled to recover under it. However, the
Insurance Contracts Act has changed this requirement, thus enabling insurance to be
taken out to protect a person against financial loss in having to pay compensation. It does
not mandate that the insured have a legal or equitable interest in the subject matter at the
time of the loss. Thus, in professional indemnity insurance as opposed to other types of
insurance, eg property, the insurer is not relieved of its obligations under the contract due
to the absence of an insurable interest.



1
    See discussion of retro-active cover later in the chapter.
As stated previously, there are many types of insurance contracts including general, life,
public liability and professional indemnity.

As stated earlier, Surveyors can be liable for negligence in the course of carrying out their
business activities. The liability may be of a professional or non-professional nature. It
is common when carrying on business to insure against acts or omissions that, if
committed by that person carrying on that business, would be classified as a breach of a
non-professional duty of care, for example, damage to third party property. Such risks
can be insured against under, for example, a motor vehicle liability policy in respect of
claims arising from the use of a motor vehicle or a public risk policy in respect of claims
arising from other more general events, such as accidents in the course of carrying out
work. Where the risks relate to carrying on professional business, then professional
indemnity insurance is the appropriate cover. In some cases, the policy will also cover
general civil liability of the insured for the day to day running of the business. Each
policy must be read carefully to ascertain exactly what it covers.

In this chapter, we will now deal with professional indemnity insurance as this is central
to the conduct of business by all professionals including surveyors.

Policies are usually drafted on a claims made basis. This means that the insurance covers
appropriate claims made during the currency of the policy no matter when the relevant
act or omission took place, or from a date as specified by the insurer. This assumes that
retro-active cover is a condition of the policy. By contrast, other general insurance
policies are typically written on an occurrence basis so that the policy only covers events
that take place during the currency of the insurance contract.

At the time of writing, there is considerable uncertainty about the terms and level of
liability in general insurance and this uncertainty may flow through to other forms of
insurance. Premiums appear to have increased significantly for general insurance in the
context of the occurrence of several major disasters and the failure of a number of
Australian insurers including HIH and REAC and a re-assessment by the insurers of their
premium charges. Thus, Surveyors should be aware that professional indemnity
insurance could undergo some reforms and may change some of the material set out
below.

General Principles of Insurance

The Proposal
Before entering into a contract of insurance an insurer will require the Surveyor to
complete a proposal form. It is usual that a fresh proposal form be filled out each time
the policy is renewed. The purpose of the proposal form is to permit the insurer to
properly assess the risk that the insurer is being asked to insure and to calculate an
appropriate premium. In order to do this, the insurer requires accurate and relevant
information concerning the particular risk. Insurers may also need additional information
on other risks, including any characteristic of the Surveyor that might itself increase the




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normal risk of loss, for example where the nature of the work undertaken is highly
specialised and technical.

Duties of Good Faith and Disclosure
The insurer expects the Surveyor to answer the questions in the proposal honestly and
fully and do what is requested. In relation to proposal forms, the law imposes a very
strong obligation on persons applying for insurance to complete the proposal form and
disclose relevant matters in the utmost good faith. This is called the principle of
“uberrimae fidei”.

This duty of disclosure has been described as being a duty to disclose such material facts
as would affect the mind of a prudent insurer in deciding whether it would accept the
insurance and if so at what premium. This obligation continues throughout the
contractual period as circumstances could change affecting the risk under the contract.
This could include a sudden and significant increase in the amount of work undertaken or
the commencement of a major project. These events could alter the basis upon which the
premium was originally assessed and should be notified to the insurer.

Among the many things asked in a proposal form for professional indemnity insurance is
whether, after due enquiry and search, the Surveyor and/or employees are aware of any
facts or circumstances that may give rise to a claim. The Surveyor is also asked to list all
claims that the Surveyor has made. Insufficient thought is sometimes given to the
obligation to make a full disclosure. In some cases where an insurer becomes aware that
non-disclosure has occurred, this could lead to a reduction in the amount of indemnity
granted by the insurer and in extreme cases, a denial of indemnity altogether.

Under the legislative requirements for disclosure, a Surveyor is required to disclose to an
insurer all material facts relating to the insurance which the Surveyor knows, or ought to
know, may influence the insurer‟s assessment of the risk to be covered and the premium
to be charged.

Thus there are two aspects of the duty of disclosure:
    Disclosure at the time the contract of insurance is entered into; and
    Disclosure/notification of material changes during the currency of the policy.

The Insurance Contracts Act 1984 has the effect, Australia wide, of modifying the
common law and overriding any inconsistent state or territory legislation2. In relation to
the duty of disclosure, the Act states3:-

        “The insured‟s duty of disclosure



2
  For example, see by the operation of section 18A of the Insurance Act (New South Wales) to the extent it
is not inconsistent with federal legislation.
3
   See s. 21 of the Insurance Contracts Act 1984 (C‟lth).



                                                                                                         3
  . (1)         Subject to this Act, an insured has a duty to disclose to the insurer, before
                the relevant contract of insurance is entered into, every matter that is known
                to the insured, being a matter that –
          (a)   the insured knows to be a matter relevant to the decision of the insurer
                whether to accept the risk and, if so, on what terms; or
          (b)   a reasonable person in the circumstances could be expected to know to be a
                matter so relevant.

   (2)          The duty of disclosure does not require the disclosure of a matter –
          (a)    that diminishes the risk;
          (b)    that is of common knowledge;
          (c)    that the insurer knows or in the ordinary course of his business as an
                 insurer ought to know; or
          (d)    as to which compliance with the duty of disclosure is waived by the
                 insurer.

  (3)         Where a person –
          (a)   failed to answer; or
          (b)   gave an obviously incomplete or irrelevant answer to,

          a question included in a proposal form about a matter, the insured shall be deemed
          to have waived compliance with the duty of disclosure in relation to the matter.”

In summary, this means that a person making an application must let the insurer know of
any problems or circumstances, already in existence, that might lead to a claim i.e. that
are known at the time of application for insurance cover.

The Act requires that, before a contract is entered into, an insurer must inform the
applicant in writing of the general nature and effect of the duty of disclosure.

The Act currently states that where there is a failure to comply with the duty of disclosure
by an applicant, or there is a misrepresentation to the insurer before the contract was
entered into, the insurer will not be able to void the policy per se unless the non-
disclosure or misrepresentation has been fraudulent, ie an intention to mislead the insurer.

Where the non-disclosure or misrepresentation in the application is not fraudulent, for
example, an oversight, the Act provides (general insurance) for an adjustment to be made.
The liability of the insurer is reduced to the amount that would place the insurer in a
position that it would have been in had the non-disclosure or misrepresentation not taken
place. Notwithstanding the absence of an intention to mislead the insurer, however, in
the case of an oversight relating to a circumstance which may give rise to a specific
claim, the insurer‟s remedy may be to avoid any liability for that claim, if it is determined
that the insurer‟s liability would not have occurred had the non-disclosure or
misrepresentation not taken place. This could mean that the Surveyor would be
uninsured for that claim.




                                                                                             4
If such a situation arose, the Surveyor should seek legal advice from an experienced
insurance lawyer.

The Act does not diminish the Surveyor‟s duty to answer properly and honestly matters
sought in a proposal form. But a Surveyor shall not be taken to have made a
representation by reason only that the Surveyor has failed to answer a question in a
proposal form or gave an obviously incomplete or irrelevant answer to the question.

Parties to the Insurance Contract
The persons entitled to the benefit of an insurance policy are the persons nominated in the
policy as the insured parties. An insurer has no obligation to indemnify a party related to
the insured Surveyor, such as an employee or subsidiary company, unless the policy so
provides. However, most policies cover all employees of the insured entity during the
normal course of work for that entity.

The Claim
An insurance policy is a contract in writing and may only be cancelled in express
circumstances set out in the Insurance Contracts Act.4 Its contents set out the terms and
conditions of the contract including the obligations owed by an insured. From a claims
point of view, the most important condition relates to the giving of notice to insurers of
claims or circumstances likely to give rise to claims. The obligation under the policy is
usually to give immediate notice, or notice as soon as possible, or within a stipulated
period. The insured‟s right to be indemnified under the policy is usually conditional
upon the obligation to give notice of a claim or an event that might give rise to a claim,
being strictly complied with. Surveyors should be familiar with the particular terms and
conditions of their insurance policies.

The requirement that notice of a claim be given to the insurer is to permit the insurer to
determine whether the loss falls within the cover of the policy. The insurer may wish to
initiate and carry out appropriate investigations to determine whether the insurer is likely
to be liable at all and if so, to what extent. It is important that those investigations be
carried out promptly and at the earliest opportunity so that any potential defence either to
defeat or diminish the claim can be properly explored.

The policy typically requires insureds to give to the insurer and its legal advisers all co-
operation and assistance in defending the claim. The insurer usually appoints lawyers to
act on its behalf where the claimant is represented by lawyers or legal proceedings have
been instituted. Those lawyers appointed by the insurer would usually conduct the
defence of the claim on behalf of the insured. This condition is very important. For
example, if the Surveyor fails to provide proper assistance then the defence could be
prejudiced, thereby exposing the insured and the insurer to unnecessary financial loss and
expense. This could affect the level of indemnity granted by the insurer and the insurer‟s
attitude towards the insured at the time of the next renewal of the policy.



4
    See discussion later in the chapter.


                                                                                             5
Under contracts of insurance, the insured subrogates its rights and obligations arising
under the claim, to its insurer. In effect, this means that in consideration of the payment
of the insurance premium, the insurer agrees to „step into the shoes‟ of the insured for the
purpose of defending the claim. This does not prevent an insured from seeking its own
legal advice, as its interpretation of the terms of the policy may not be the same as the
insurers. Furthermore, the insured may not agree with the approach to negotiation or
settlement of a claim and has the right to object. It is possible that a commercial
settlement proposed by an insurer may be to the disadvantage of the insured in terms of
cost and/or reputation. This normally necessitates some form of agreement between the
insured and the insurer.

In order to be in the best position to defend a claim, policies frequently provide that once
a claim arises, the Surveyor should not make any admission of liability and that it would
be a breach of the insurance policy to make such an admission. This does not preclude
the Surveyor from acknowledging or confirming that a specific event has taken place, as
this does not have the same consequences at law.

In addition, Surveyors should be mindful not to sign contracts which have exclusionary
clauses in them without consulting their insurers. These clauses may have an impact on
the rights of the insurer under subrogation should something go wrong and a claim be
made involving third parties.

As stated in Chapter Two, where the claim against the Surveyor arises because of
negligence on the part of an employee, in some states liability could be passed on to the
employee. However unlikely this may be, ideally employees will be familiar with the
nature and extent of the insured‟s professional indemnity policy so that they can
accurately assess their position.

Professional Indemnity Insurance

Professional indemnity insurance is insurance taken out by professional entities to protect
themselves from claims for compensation or damages as a result of alleged negligence,
errors or failure to perform to required standards for the client or other party in the course
of their business. This can include breach of duty of care, breach of contract or,
alternatively, actions under Trade Practices and Fair Trading legislation.

For many years, Surveyors like other professionals have taken out professional indemnity
insurance. As the terms and financial limits of insurance policies are influenced by
market forces, over the years there have been changes to the nature of professional
indemnity policies consistent with changes in the insurance market for such insurance
cover. Those changes affect premiums, limits of indemnity, excesses (deductibles) and
extent of cover. With recent heavy losses suffered by almost all the major insurers
(including corporate collapses), we can expect higher premiums and changes to policy
conditions and also the availability of this type of insurance. As insurance is designed to
protect the insured from the economic effects of proven claims, it is essential to adopt and
maintain work practices that minimize the possibility of claims.



                                                                                               6
An excess or deductible is the amount of the claim which is borne by the insured. This
excess may be costs exclusive or costs inclusive to the insured. Costs exclusive means
that all investigation, legal and defence costs are payable by the insurer, ie the defence of
the claim, whether successful or not. Thus, there is no cost to the insured other than the
assistance it must give to the insurer under the terms of the policy. By contract, a costs
inclusive policy means that the insured is responsible for the costs of the investigation,
legal and defence costs up to the limit of the insured‟s excess, whether the claim is
successful or not. A costs inclusive policy may have a lower premium than a costs
exclusive policy.


       Remember: it is extremely important to read and understand the terms
       and conditions of the policy carefully and to get expert advice where
       necessary, particularly as to whether the policy is costs inclusive or costs
       exclusive to the insured.

As a matter of prudence and best practice, applicants for insurance should seek to have
the following matters included in their insurance policy:5

   1. Depending on the premium charged, it may be preferable that the policy should be
      costs exclusive to the insured.

   2. The policy covers claims arising from negligent acts, errors or omissions
      regardless of when those acts, errors or omissions occurred. This means the
      policy has a clause providing unlimited retro-active cover.

   3. The policy covers claims arising from all aspects of the relevant survey/geospatial
      information practice.

   4. Depending on circumstance, that the policy covers as an insured all employees
      and also any subsidiary companies or other business structures carrying on the
      same or similar business, together with the directors or partners.

   5. The applicant should be able to nominate the desired level of excess payable for
      each claim subject to any minimum requirement of the insurer.

   6. The policy should be guaranteed to continue for a specified period with no option
      to terminate, for example, mid term except as provided under insurance contracts
      legislation.

   7. The cover be extended so as to insure the liability of former partners or directors.


   5
     The list includes material from The Practitioners‟ Guide to Professional Indemnity
   Insurance by Kevin Blume (1995, Australian Consulting Surveyors Insurance Society
   Ltd, pp. 6-7).



                                                                                             7
   8. There should be automatic reinstatement of cover after each claim. This may be
      less common due to changes in the insurance market.

   9. The policy insures against claims for death or bodily injury to third parties, not
      being employees, that may result from an insured‟s negligence.

   10. Where applicable, the cover be extended to cover claims arising out of
       professional work carried on overseas.

   11. Specialised investigators are appointed for the assistance of both the insured and
       the insurer as, for example, under the ACSIS scheme.

   12. The insurer should have a proven ability to service the survey and geospatial
       information profession.

The policy wording should be written in simple language and applicants should query
anything that they do not understand.

The insurance legislation strictly limits the circumstances within which the insurer can
cancel a policy. Obviously, from an insured‟s viewpoint, it is important that the insurer is
not given the opportunity to cancel the insurance contract. This could have serious
financial consequences for a practice and the people who operate it where subsequent
claims arise and the practice is uninsured.

Cancellation is regulated under the Insurance Contracts Act and provides that the
insurance may only be cancelled where the insured:

      Fails to act in good faith;
      Fails to comply with the duty of disclosure when the contract was entered into;
      Makes a misrepresentation to the insurer before the contract was entered into;
      Fails to comply with a provision of the contract including a provision relating to
       the payment of the premium; or
      Makes a fraudulent claim under the policy, or any other policy, during the period
       of cover under the contract of insurance;

Summary of the Insurance Scheme Facilitated through ACSIS

The Association of Consulting Surveyors of Australia created a Federal Professional
Indemnity Insurance Scheme. The self-regulatory scheme is available to surveying and
geospatial information practitioners. The scheme has established panels of experienced
investigators capable of providing assistance to the insurer, the broker, Surveyors and the
public. The panels are required to investigate claims and report to the insurer. Panel
members are selected from those members of the profession who have long experience in
general practice.




                                                                                            8
There have been several state initiatives to limit the extent of professional liability. Both
New South Wales and Western Australia have professional indemnity limitation
legislation, called the Professional Standards Acts. Both Acts have similar objectives,
namely: -

      (a) “to enable the creation of schemes to limit the civil liability of professionals and
     others,
      (b) to facilitate the improvement of occupational standards of professionals and
     others,
      (c) to protect the consumers of the services provided by professionals and others,
     to constitute the Professional Standards Council to supervise the preparation and
     application of schemes and to assist in the improvement of occupational standards
     and protection of consumers.” 6

The Councils created under this legislation have the ability to limit or cap the quantum of
recovery for a range of professional liability. ACSIS is represented at the Council via the
Professional Surveyors Occupational Association. However, these schemes do not apply
to all civil actions. Importantly, they do not limit liability for actions under the Trade
Practices Act or its state or territory equivalent. The matters of uniform state legislation
throughout Australia, and the modifying of the Trade Practices Act (Commonwealth) to
make it compatible are currently under review by state, territory and federal governments.

Further limitation of liability is expected to flow from the current review by the federal
government of the law of negligence. The federal Ipp Report 2002, as the review is
known, has recommended that the test for negligence be rewritten. At the time of
writing, it is not certain what recommendations will be accepted or what changes will be
made by the various jurisdictions throughout Australia. It is important to keep up to date
with any changes that are made as they may affect the reach of civil law in surveying and
geospatial science. They may also have an impact on the terms and conditions of the
insurance policy, in particular the premium paid.

The Professional Indemnity Cover – Exclusions Normally Applicable.

Professional indemnity cover may exclude claims for:-

1.       Dishonesty, fraudulent, criminal or malicious acts or omissions by the insured or its
         agents and wilful breach of any contract or statute or duty by the Surveyor or its
         agents;

2.       Claims arising from negligent acts, errors or omissions committed outside
         Australia. Alternatively, there are often specific exclusions for claims arising out
         of the United States and Canada;



     6
         See s.3 of the Professional Standards Act 1994, NSW.



                                                                                                 9
3.     Claims arising out of a trading debt incurred by the insured, but any exclusions
       should not apply to cross claims triggered by fee recovery actions. These claims
       normally fall within the terms of the policy;

4.     Claims arising out of war, invasion, acts of foreign enemies, rebellion, terrorism,
       insurrection or nuclear incident;

5.     (a) Circumstances which the insured was aware of prior to the commencement of
           the policy, but did not declare to the insurer, and where the insured ought
           reasonably to have known would be likely to give rise to a claim; or

       (b) Circumstances where notice had been given, or ought reasonably to have been
           given, under a previous policy.

6.     Claims in relation to occupiers‟ liability, that is, as a result of occupation or
       ownership of real property.

If a policy does not provide indemnity for claims against a Surveyor‟s employees as
insured under the policy, then those employees should be informed of this and advised to
obtain advice about suitable professional indemnity insurance.

       Remember: Professional indemnity insurance transfers the risk; it does not
       minimise it.

Determination of a Claim

In order to determine if a claim falls under professional indemnity insurance provisions,
the following matters arise for consideration:

1.       Whether the Surveyor at the time of carrying out the alleged act or omission
was carrying on business in the usual sense of the term ie. surveying, geospatial
information or related work.

2.        As discussed in an earlier chapter, the liability of a Surveyor for professional
negligence really flows from the answer to the question to whom does the surveyor owe a
duty of care (whether in contract or in tort). There are a number of possible answers to
this question:-

i.                  Another party to a contract, either written or verbal.
ii.                 A person to whom a duty of care is owed for the negligent statement
                    by a Surveyor.
iii.                A person to whom a duty of care is owed for the negligent act, error or
                    omission of a Surveyor giving rise to actual or threatened physical
                    damage, or emotional suffering or trauma.




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iv.                 A person who suffers pure economic loss from the carrying out of
                    survey work due to the existence of sufficient causation between the
                    Surveyor‟s negligence and the economic loss suffered.
v.                  A person to whom a Surveyor owes a fiduciary duty.

If the claim against the Surveyor arises out of the Surveyor‟s professional negligence and
the third party falls within the above-mentioned categories, then the policy applies.
Negligence has its roots in unintentional conduct or omission that demonstrates a lack of
reasonable knowledge or skill in all the circumstances. Matters of dishonesty, fraud or
criminal or malicious acts are intentional acts and are not covered by the policy.

It must also be recalled that Surveyors can be held liable even where there was no duty of
care owed, but where there was, for example, misleading or deceptive conduct under the
trade practices legislation. This type of claim has become more and more prevalent in
recent years.

Surveyors should consider the adequacy of the terms and conditions of their insurance
cover. A Surveyor should seek advice as to the limit of indemnity that should be
provided for in the policy. This, to a large extent, depends on the size of the business
undertaking and the type of risks associated with the work that a Surveyor undertakes.

The monetary limit is governed by the amount stated in the policy at the time the claim
arises or at the time the Surveyor receives notice of the circumstances that give rise to the
claim. If the limit of cover is insufficient, the Surveyor must make up any shortfall.

The use of explanatory clauses in contracts and notification statements on plans and other
documents by Surveyors will minimize the likelihood of having a claim. These matters
are discussed in Chapter Five.


Negation of Cover

It is worth summarizing some of the conditions that may limit or compromise insurance
cover and therefore leave the insured at risk. These items are spelled out in the policy
and may vary from contract to contract

Firstly, cover must be current with the premium paid and, preferably, a certificate of
insurance issued in the correct name or names. Obviously, where insurance lapses, the
Surveyor will be exposed to the full liability for any event that takes place or claim that
arises whilst uninsured.

Admission of liability may reduce or remove entirely the insurance cover as it can
prejudice the insurer‟s right, under the principle of subrogation, to defend the matter as
the liability has already been determined. This area is dealt with further in the next
section.




                                                                                              11
It should also be noted that contracts for the performance of survey work should not be
entered into without serious consideration where there are clauses excluding the liability
of the other party. Before these contracts are finalised, Surveyors should seek legal
advice and discuss the consequences of these clauses with their insurer, as the insurance
policy may not respond to claims being handled in such a way as to prevent recovery
from a negligent party.

An act or omission which is illegal or unlawful cannot be accepted as a valid claim.
Accordingly, if a Surveyor undertakes a fraudulent or criminal act in the course of
carrying on professional activity resulting in a claim, the terms of the insurance policy
(and the general law itself relating to the interpretation of insurance contracts) will
usually exclude cover.

Non-disclosure of relevant information may also invalidate an insurance policy in certain
circumstances, or may lead to a diminution of the value of the policy. For example,
where an insured deliberately omits to mention a potential claim in the proposal form
provided to the insurer, then this would have the potential to invalidate the cover under
the policy. Where the omission by the Surveyor is innocent or a mere oversight, the
policy may be adjusted to reflect this, if possible, without invalidating the whole contract.
It should be remembered that the insured has an obligation to keep the insurer informed
of any relevant changes in circumstances which could affect the insurer‟s previous
assessment of the risk to be insured.

It is also important to remember that the insurance policy will only apply to a specific
range of events typically set out in the definition section or in a schedule to the policy.

Finally, the insured is required to do all things necessary to assist the insurer in the
defence of any claim. Failure to do this may invalidate the cover. The reason for this is
that the insurer has taken on the rights of the insured to process and defend the claim, yet
it was not party to the events leading up to the claim event itself. Thus, it will place
reliance on the co-operation and assistance of the insured in processing the claim to its
conclusion.

    Remember: it’s your claim but the insurer’s money, so be co-operative.



Useful Tips for Claims Handling

Should a problem arise that may lead to a professional indemnity claim, it is important
not to panic or permit the anxiety of the situation to overtake rational, considered action.
The following tips are derived from The Practitioners’ Guide to Professional Indemnity
Insurance referred to earlier (pp.17-18).




                                                                                              12
1. Notify the insurer.
Where a Surveyor becomes aware of a possible claim, the insurer and broker should
be notified immediately and a record made of the conversation. It may also be
appropriate to seek legal advice. Where Surveyors are members of the ACSIS
scheme, they will have the assistance of an experienced claims investigator.

2. Do Not Admit Liability Under Any Circumstances.
There are often circumstances surrounding a claim event that complicate it and make
liability unclear. Thus it is inappropriate to admit liability or to strike any deals
because you may be prejudicing the rights of the insurer as the insurer has discretion
as to how the claim will be handled. Just because an error has been made, it does not
follow that liability attaches. All that can and should be done is to acknowledge that
a particular event has taken place with no reference to liability or consequences.
Even an offer of free work or a reduction in fees by a Surveyor may compromise the
position in relation to a potential claim. Thus any compromise may jeopardise the
terms of the contract of insurance and adversely affect the outcome.

All of this must be balanced with the Surveyor‟s need to maintain ethical standards.
Where a Surveyor is aware of an error and fails to inform its client, this could amount
to unprofessional conduct under the requirements of professional legislation and lead
to prosecution or even give rise to an action for misleading and deceptive conduct
under the relevant trade practices legislation. Once again, in these circumstances, a
Surveyor can acknowledge or confirm the error with the client, but not admit liability.
These are usually two distinct and separate actions.

3. Document the relevant circumstances.
It is important to maintain a diary/account of events that may be the subject of a
claim. Employees/consultants involved in the event should do likewise and provide a
copy to the employer. Where possible, also obtain statements from witnesses. These
accounts should preferably not contain any opinion, rather a statement of the facts.
By the time a claim is settled or disputed in court, it is often months if not years.
These records provide a valuable reference point for the defence and allow the
Surveyor to prepare a detailed statement for the advisers and insurer.

4. Obtain photographic evidence.
Where appropriate, get as many relevant photographs as possible of the site or
building that is the subject of the claim. This may include signage or distant and
close up shots of the site. Ensure that details of date of processing of the photos are
retained for evidentiary purposes.

5. Co-operate fully with the insurer.
This is a requirement of the insurance policy.




                                                                                          13
   6. Client relationship.
   Where possible, maintain a good relationship with the company/person making the
   claim, as this may put the Surveyor in a better position to be able to mitigate the cost.
   Again, there must be no admission of liability.

These tips are not intended to be exhaustive. However, their observance should
contribute to minimizing any problems arising from a potential claim.


Further Reading
Mann, P Annotated Insurance Contracts Act (3rd ed.) Law Book Co., NSW, 2001.
Sutton, K Insurance Law in Australia (3rd ed.) LBB Information Services, NSW, 1999.
Marks, F Guide to Insurance Law in Australia (3rd ed.) CCH, Sydney, 1998.


  Key Points for Review
      A contract of insurance is a contract of indemnity and is founded on the doctrines
        of utmost good faith and full disclosure. It is fundamentally different from a bet or
        wager.
      Insurance contracts are regulated nationally under the Insurance Contracts Act.
      Policies may be drafted on an occurrence or claims made basis. Professional
        indemnity policies typically provide for retro-active cover for claims made during
        the currency of the policy no matter when the event actually took place (claims
        made basis). Other general insurance contracts cover only events taking place
        during the currency of the policy (occurrence basis).
      Surveyors should read carefully and understand the contents of their insurance
        policies. There are certain terms to look for in these contracts (see list within).
      When a claim is made and the insurer agrees to indemnify the insured, the rights
        of the insured are subrogated to the insurer. Despite this, an insured should seek
        independent legal advice where there is any doubt about how the matter is being
        managed, negotiated or settled. In general, the insurance policy will require the
        insured to cooperate fully with the insurer and, as appropriate, its legal advisers in
        defence of the claim.
      The legislation strictly regulates the insurer‟s ability to cancel a policy.
      An insured should not admit liability in relation to a potential or actual claim
        under any circumstances. This will be a requirement of the insurance policy.
      Where practicable, photographic evidence should be obtained and an account of
        the relevant circumstances maintained (see other useful tips within).
      An insurance scheme is facilitated by ACSIS and provides assistance to the
        profession and insurers through the investigation and reporting of matters
        surrounding the claim.




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