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Professional indemnity insurance for quantity surveyors

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        <h2>Generally</h2>
<p>Clause no. 1.4 of conditions of engagement of Australian Institute of
Quantity Surveyors (AIQS) has states "<em>The Quantity Surveyor will
exercise reasonable skill, care and diligence in performing its
work</em>".</p>
<p>If a client got a loss because of the Quantity Surveyor (QS) fails to
comply with aforesaid sub clause or similar one, QS is at a risk of being
sued by the client.</p>
<p>Some examples for branch the sub clause;</p>
<p>1)Â Â Â Â Â Produce an unrealistic law estimate</p>
<p>2)Â Â Â Â Â Arithmetical errors in Bills of Quantities
(BOQ)/Estimates</p>
<p>3)Â Â Â Â Â Certify an over payment.</p>
<p>The case of Commonwealth bank of Australia v Hollier, the QS was held
liable to pay the Holliers, the difference between the variation that had
been assessed and what the Court found should have been assessed plus
interest. The QS get a fee for variation assessment is $3000 but he had
to pay the damage of $70000+interest to Hollier. Actually the fee $3000
is a reduced fee while the actual fee is $30, 000; however the court did
not consider any suggestion that the fee reduction entitled the QS to
perform with less the reasonable care. Even advices without fee may cause
for punishes by court under professional negligence.</p>
<p>In such situations QS may have to pay more than the consultancy fee as
damage to a client. How QS can manage such big risk?</p>
<p>Most practicable way is use Professional Indemnity Insurance as risk
sharing mechanism.</p>
<p>Â </p>
<h2><strong>Professional Indemnity Insurance (PII)</strong></h2>
<p>PII is an Insurance scheme for Professional as a safe guard in their
professional life to cover negligence or breach of contract. PII
generally obtain by business professionals like QS who provide advice to
their clients.</p>
<p>Some of professional Institutions like AIQS and Royal Institution of
Charted Surveyors (RICS) have been recommend the PII for their members in
code of professional conducts/regulations. Sub clause 3.13 in AIQS code
of professional conducts states <em>"where holding themselves out to the
public as practicing quantity surveyors, have and maintain appropriate
professional liability insurance". </em>Also RICS members in private
practice must have minimum indemnity insurance cover of £ 250,000 if
their gross fee income does not exceed £100,000, and £500,000 for gross
fee between £100, 000 and £200,000. Further it recommends a minimum
£1,000,000 insurance if the gross fee exceeds £200,000.</p>
<p>Professional liability insurance should take few years beyond the end
of job or service. Because every claims not arise just after the service,
it may be few years later. Some laws have defined the liability of
consultants beyond the completion/handover of the project.</p>
<p>Qatar Civil code article 219 states1 liabilities for an<em> "unlawful
act" (which may or may not include one of negligence) expire three years
from the day the injured party becomes aware of the loss or fifteen years
from the commission of the unlawful act, whichever is sooner." </em>It
means contractual liability is continues for period of fifteen years.</p>
<p>In addition that according to latent damage act 1986 in UK, any court
proceeding claiming damages must be commenced within six years from the
bench of contract or from when the damage was suffered where a claim is
made in tort. Because of such reasons RICS advises run-off cover for an
absolute minimum 6 years.</p>
<p>Further, QS should take the PII not only for cover the damage awarded,
also it should sufficient to cover interest and cost of the person making
the claim.</p>
<p>Professional indemnity insurance is a "claims made" policy. It means,
it cover the claims made/notified within the policy period but not claims
arising out of a branch of duty within the policy period. Because of that
the insured should notify the insurer as soon as possible after aware
about any event which is likely to result in a claim. Also insurer does
not liable for claims which the insured knew about before the policy was
agreed. It is a liability of previous insurer. Because of that insured
should notified to the insurer, any event which is likely to result in a
claim before the end of each policy year, especially when changing the
insurers.</p>
<p>Â </p>
<h2><strong>Liabilities which are not cover from PII</strong></h2>
<p>Generally a Professional indemnity policy for QS is limited to a QS
profession only. It would not cover project management or dispute
resolution services. If QS want to include such special services to his
Professional indemnity policy, he should discuss it with the insurance
company.</p>
<p>Also some policies may cover claims for bench of contract and some are
not.</p>
<p>Sometimes QS have to give a collateral warranties to third party, such
as future buyers or tenants. Collateral warranties are not likely to be
covered by PII policies. In such cases QS need to take advice from
insurance company.</p>
<p>In addition that PII cover the damages only to client but not damages
to third parties. Because of that it's good to take public liability
insurance (PLI) which concerns the damages to third parties.</p>
<p>Also there is a another liability of both designers and contractors as
Decennial liability which is run beyond 10 year from date of hand over in
some countries like Qatar, French and Egypt. Decennial liability is not
falls within the scope of professional liability insurance. In some
countries like French and Egypt it is a legal requirement that designers
and contractors obtain insurance against decennial liability.</p>
<p>When enter in to consultancy agreement with a lead consultant/Client,
PII and PLI may be a mandatory condition.</p>
<p>Â </p>
<h2><strong>How to minimize risk of negligence claims for
QS</strong></h2>
<p>Quantity Surveyors can adopt good quality management system and
professional guidance in their practice to deliver their service in high
standard with reasonable skill, care and diligence. Also claims can be
minimized by adopting a clearly drafted Conditions of Engagement. In
addition that;</p>
<ul>
<li>Do not take assignments which are outside the field of
competence.</li>
<li>Consider collateral warranty carefully and check whether it is
covered by the PII policy or not.</li>
</ul>
<p>Â </p>
<h2><strong>Q &amp; A</strong></h2>
<p><strong>1)Â Â Â Â What happened if the claimant insolvent before
settled the claim?</strong></p>
<p>Any claim made by insured against the insurer is automatically
transferred to the victim. However if insured fails to comply with policy
requirements, victim may not entitled to receive damage.</p>
<p><strong>2)Â Â Â Â Is the PII only for consultants?</strong></p>
<p>Generally in construction industry PII is obtained by consultants, who
provide advice to their customers. But contractor also have to maintain
PII if he is engaged in design process. For example In JCT conditions of
contract, sub clause 6.11.1 requires the contractor to take a PII.</p>
<p><strong> 3)Â Â Â Â If insured provide false details when enter in to
insurance agreement or fails to disclose information about risk, can the
insurer treat the insurance contract as void?</strong></p>
<p>Yes. Insurer can. The parties to an insurance contract owe each other
a duty of good faith. If the insured doesn't enter or perform the
contract in good faith, insurer not bound to indemnify the insured, even
the non-disclosure is innocent. However insured still entitled to
recovers the premium he has paid.</p>
<p><strong> 4)Â Â Â Â Insured makes a fraudulent claim, but part of the
claim makes honestly. Is the insured entitled to recover the damage, at
least for honest part?</strong></p>
<p>No. He is not. This also comes from good faith. Sometimes it may be
reinforced by the insurance policy.</p>
<p><strong> 5)Â Â Â Â What are the Sri Lankan Insurance companies which
provide PII?</strong></p>
<p>Asian Alliance Insurance and Union Assurance</p>
<p>Â </p>
<h2>Reference</h2>
<p>1)Â Â Â Â Â Grose, M. and Warren, L., 2007. Decennial liability under
the Qatar civil code. [Online]. Available at: <a rel="nofollow"
onclick="javascript:_gaq.push(['_trackPageview',
'/outgoing/article_exit_link/4856230']);"
href="http://www.clydeco.com/knowledge/articles/decennial-liability-
under-the-qatari-civil-
code.cfm%5BAccessed">http://www.clydeco.com/knowledge/articles/decennial-
liability-under-the-qatari-civil-code.cfm[Accessed</a> on March 2011]</p>
<p>2)Â Â Â Â Â Poulton, W., 2010. Historical and Emerging Risks. <em>The
Building Economic</em>, September 2010, pp.26-31</p>
<p>3)Â Â Â Â Â ?,?., ?. Professional Liability and Indemnity. Royal
Institution of Charted Surveyors</p>
<p>4)Â Â Â Â Â Royal Institution of Charted Surveyors, 2011.
Professional Indemnity Insurance. [Online] Â Available at: <a
rel="nofollow" onclick="javascript:_gaq.push(['_trackPageview',
'/outgoing/article_exit_link/4856230']);"
href="http://www.rics.org/site/download_feed.aspx?fileID=672&amp;fileExte
nsion=PDF">http://www.rics.org/site/download_feed.aspx?fileID=672&amp;fil
eExtension=PDF</a> [Accessed on March 2011]</p>
<p>Â </p>
<p>Â </p>
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