031 Claims and Compliance with Alexandra Anderson

Alexandra Anderson is an insurance lawyer and partner at City law firm RPC, who specialises in defending claims against surveyors and valuers.  

Either via their insurers and upon direct instructions, Alexandra regularly gets drafted in to act for surveyors on the defence of a wide variety of claims, arising from all aspects of the typical surveying practice, from survey and valuation to property management and receiverships.

Alexandra is also a regular speaker and author on a wide range of industry topics. She co-edits Hogarth’s ‘Insurance for the Construction Industry’ and was involved in the last 3 revisions to the RICS’s minimum terms. She sits on the Market Liaison Group and works with RICS on a variety of risk management and education issues.

Claims Against Surveyors and Valuers – Then and Now

Alexandra and Marion start by discussing how the surveying practice and standards have changed over the years, and how the ability to record the work has drastically helped to protect against claims.

“The first decade of the 2000s was a horrible time for many surveyors,” Alexandra starts. “You were seeing some claims come in where they were saying there’s been an over valuation of 5% on a commercial property, and you must know that there is a permitted margin of error. Of course, the moment you receive a claim, not only is it hugely distressing, but also once you notify your insurers, then that’s a mark on your record, irrespective of the merits of the claim. That fuelled a lot of uncertainty and concern in the insurance market, which is now even now being reflected after Lloyds have cut back on the amount of professional indemnity they write including surveyors, because they weren’t making enough money on it. And that, of course, is now having a huge impact for businesses who are trying to renew their policies and finding their premiums have gone through the roof.”

“When people were doing valuations in the early 2000s, there wasn’t anything like the ability to store and record data. That was often one of the biggest challenges of trying to defend a claim is you received a file that was basically the letter of instruction. It was very difficult to persuade a judge that someone has exercised reasonable skill and care in putting together a survey or evaluation, if you’ve got nothing there to demonstrate that they’ve checked the dam, that they’ve inspected the area that is said to have the defect, or that they properly analyzed the comparable evidence in order to come up with the valuation.”

Today, besides the technology to record their surveys, surveyors and valuers have the Rightmove’s Surveyor Comparable Tool (SCT) at their disposal to help them with their valuation work. Alexandra advises surveyors to store their surveying records and documents for at least 12 to 15 years, because that’s how long they could face a claim under Section 14 of the Limitation Act.

Negligence and Margin of Error

Alexandra continues to give us a little masterclass on the terminology related to claims and surveyors’ protection, so we asked her to instruct us a bit on what negligence and margin of error mean in the context of claims, as well as how to put together firm Terms of Engagement.  

“Negligence means that if you as a professional person, are asked to provide advice to a third party, you owe them a duty of care and obligation to make sure the advice that you give them is accurate or reasonable. Particularly in the valuation, it doesn’t have to be the correct value of that property, because who knows what that is, but as long as you’re in the right area, then it’s a reasonable figure to advise. Now, if you don’t do that, if you give poor advice, wrong advice, and if the person relies on that advice and suffers a loss, then they can bring a claim against you in negligence, because you have failed to discharge your duty of care to exercise reasonable skill.”

“As for the margin of error,” she continues, “if you’re looking into a let’s say bog-standard one flat within a block, there should be plenty of comparable evidence to help you make your decision, and then the margin will be around 5%. If you’re looking at other residential property that is fairly standard, there’s nothing extremely unusual, it’s not a particularly big property, it isn’t in a particularly unusual location, it doesn’t have other facilities that might affect the value, then you’ll probably look into plus or minus 10% margin of error. But when you’re looking at commercial property, that’s when you can get to much larger margins, because of many uncertainties surrounding this market.”

Why You Can’t Copy/Paste the Terms of Engagement

Many surveyors are asking their mates to borrow Terms of Engagement from them. RICS has issued some guidelines as part of their Home survey standard, but we have been wondering if that is enough for a confident surveying practice.

“It certainly forms a good starting template,” Alexandra says. “It includes everything that you should be thinking about before you engage with the client, but of course, you have to think about what you’re actually including in there. If you’re putting in a limit of liability, particularly when you’re dealing with the consumer, it’s unlikely to be enforceable if it’s just part of your standard terms. In each case, it’s not enough to just simply say ‘I printed off this document that’s got all the boilerplate terms there.’ You have to make sure everything is appropriate and will also be enforceable in any event you need to lean on it.”

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