RTPI NEWS: The cost of professional indemnity insurance

Chris Sheridan explains why the cost of the institute's low-income scheme has been increased.

Members in the consultancy sector, particularly those who are self employed, will be only too aware of the increases in the premiums that they are paying for professional indemnity insurance.

The insurance market as a whole has seen premium increases of anything between two and 600 per cent over the past 18 months due to a number of reasons. Those most commonly cited are:

- The decreasing number of insurers offering cover.

- A restricted availability of capital to underwrite risks.

- The failure of insurers' investments to perform on the stock market - effectively ceasing to subsidise the level of premiums that they were charging their customers.

The RTPI's low-income insurance scheme, applicable to members whose income from private work is less than £5,000 a year, has not escaped such increases.

It has therefore been necessary to amend the annual premium from £50 to £75. But the scheme, which is run in partnership with Perkins Slade Ltd and Royal Sun & Alliance, still offers excellent value for money cover.

The increased premium has, however, been somewhat offset by the provision of a higher £250,000 limit of indemnity, which Perkins Slade has negotiated with insurers. This is particularly useful given the rise in both the frequency and cost of claims currently being made, which has shown that the previous limit of £100,000 could easily be absorbed by paying for defence costs and any settlement that may have to be made.

Claims made against consultants

As you may be aware, the RTPI's professional indemnity insurance regulations apply to all members who give advice in their own name. This is not only common sense, but also a consumer protection issue as clients will have the security of knowing that you will be able to meet any claim in the unlikely event of one being made against you.

While planning is considered to be a low-risk profession, members can still find themselves the subject of a claim and, while not all claims are valid, you could face additional work, interruption and uncertainty if a claim is made.

The following are a few examples of the types of claims that have been brought against planning consultants:

- Consultant appointed midway through the planning process and, under commercial pressure, used work previously done by another consultant who discovered this and sued for unauthorised use of their work.

- Consultant sued for alleged negligence for allowing a project to go both over time and over budget, despite client changing their specifications regularly.

- Alleged negligent handling of the planning process for a substantial redevelopment.

- Alleged defamation of character made by a consultant.

- Consultant engaged, without a formal written contract, to provide general planning and building regulation advice. Planning permission gained but construction not in accordance with the consent. Client claiming negligence of both the planner and surveyor involved.

- Consultant requested to ascertain whether an earlier planning permission could be implemented after work on a project was stopped because contractor demolished too much of the original structure. Work was recommenced and subsequently halted again. Client claiming for extra expenses incurred.

- Consultant received complaints from a client's neighbour regarding the nature of work being carried out to adjacent property. Concerns expressed over whether the work could have potential to cause subsidence in nearby area.

Unfortunately, we live in an increasingly litigious society, and the above are just examples of the types of claims that have been made. Professional indemnity insurance will not only provide peace of mind, but it will also help safeguard your professional reputation and your business.

- For further information on other services for members in private practice, please contact Chris Sheridan (e-mail) chris.sheridan@rtpi.org.uk.

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