RICS draft guidance note - Risk, liability and insurance, 3rd edition

Risk, Liability and Insurance - 3rd edition

Glossary

Alternative dispute resolution (ADR)

The process of resolving disputes, including negligence disputes, other than by litigation. See Appendix E.

Arbitration

A private dispute resolution process. See Appendix E.

Assignment

The process whereby the benefit of all or part of a contract, is transferred by one of the original parties to a 'third party'. If a contract is assigned by the client, the assignee is effectively treated as the member's client. Assignment can be prevented by express words in the contract. See Appendix C.

Bilateral loan

A simple type of commercial loan. See Appendix C.

Bracket

The bracket of hypothetical reasonable valuations used to assess whether the valuation actually given was negligent. See Appendix A.

Claims made

The basis on which most professionals' (and all members') professional indemnity insurance is provided. It means that the relevant policy for any claim is the policy in place when the claim is made (not when the work is provided to the client, or any other time). See section 6.

Commercial mortgage-backed security (CMBS)

Aa type of finance transaction. See Appendix C5.

Delict

Used in Scots law instead of 'tort'.

Desk-top valuations

Valuations conducted without a site visit.

Disclosure

Permitting advice to be seen by or disclosed to a third party (i.e. a person or entity who is not party to the member's contract of engagement) without assumption of a duty of care.

In the context of litigation, this can also refer to the parties' obligations to preserve and provide relevant documents.

Duty of care

The duty in 'tort' assumed by a professional to observe the skill and care of a 'reasonable' valuer in providing professional services. Such a duty may in certain circumstances be assumed to a 'third party' as well as to the professional's contracted client.

Engagement letter

A letter issued by a member that records the contract with the member's client. It may be accompanied by terms and conditions. See section 5.

Expert witnesses

Members giving independent expert evidence to courts and tribunals.

Indemnity

A contractual agreement sometimes given by a party providing professional services to 'hold harmless' or 'make whole' the client in respect of the client's losses arising from the matter. See paragraph 2.6.4.

Joint and several liability

The liability partners have to claimants for claims against the partnership, co-defendants and 'joint tortfeasors' have to claimants. See paragraph 6.3.

Joint tortfeasors

Parties (usually professional firms) who take on responsibilities 'jointly and severally' to a particular client or claimant, when they work alongside each other. See joint and several liability and paragraph 5.3.

Liability cap (or limitation of liability)

A contractual agreement that a client can only claim damages up to the amount agreed, even if the law would otherwise award a greater sum in damages. See section 3 and Appendices B and C.

Limitation periods

The periods specified by statute and the common law for a claimant to commence legal proceedings. The periods vary depending on the type of claim and the type of services provided. When the period is over, the claim becomes 'statute barred' and, while the claimant can still pursue the claim, they will not be entitled to recover any damages. See paragraph 2.7.

Limited Liability Partnership (LLP)

A type of legal entity for carrying on business, governed in the UK by the Limited Liability Partnerships Act 2000. Unlike a partnership, an LLP does have a legal existence as an entity separate from its partners (called 'members' in an LLP), and it is that entity which enters contracts and provides services. Practicing through an LLP is an effective and recognised way for partners in professional firms to manage the risks associated with personal liabilities.

Mediation

A principal form of ADR. See Appendix E.

Members (LLP)

See Limited Liability Partnership. Although many firms that operate as LLPs still refer to their principals as 'partners', the technically correct term for the principals of an LLP is 'members'.

Mezzanine loan

A high risk/high reward form of lending. See Appendix C4.

Negligence

Negligence is a 'tort'. In the case of a professional, negligence is a failure to provide services with the standard of skill and care that would be expected from a reasonable body of the professional's peers.

Professional indemnity insurance (PII)

Insurance to cover the cost of compensating clients for loss or damage resulting from negligent services or advice provided by a business or an individual.

PII limit

A firm's PII limit is the maximum amount the firm's PII insurer will pay in the event of a claim. It is sometimes wrongly confused with a liability cap. See section 3.

Pre-Action Protocols

The regime applicable to legal disputes in England and Wales whereby parties exchange correspondence and documents before commencing formal legal proceedings, with a view to avoiding altogether the need for formal legal proceedings if possible. There is a specific Pre-Action Protocol applied to professional negligence claims. See Appendix C.

Proportionate liability

Liability that is limited to the damage actually caused by the particular defendant. A 'proportionate liability clause' is a contractual mechanism whereby the liability of a member can be limited to the member's proportionate liability. See section 5.3.

Residential mortgage-backed security (RMBS)

A type of finance transaction. See Appendix B.

Run-off insurance

A form of insurance that can be bought to provide cover for claims arising after a firm or individual has ceased trading. Members have a particular need for it because members' PII is provided on a 'claims made' basis, meaning that there will only be insurance cover for a claim if there is a policy in place when the claim is made - even if the claim is made after the member (or firm) has ceased practice. See section 7.

SAAMCO Cap

An important principle in the common law of damages as it applies to property valuers, which ensures that valuers can only be liable for the losses they can properly be said to have caused. See A1.2.

Securitisation

A type of commercial finance transaction whereby a primary lending bank bundles loans, and sells them to investors. See Appendix B1 and B2.

Security agent (also known as 'collateral agent')

In a syndicated lending situation, the party that holds the collateral on behalf of the lenders.

Sub-limits

Specific limits within a PII policy for certain specified types of claims, such as loss of documents.

Syndicated loan

A commercial loan that is shared by a group of lenders. See Appendix B2.

Third party/third parties

Anybody who is not a party to the contract. Usually this means anyone who is not the member's client. Examples include the borrower, in a situation where the member's client is a lender. See section 5 and Appendices A, B1 and B2.

Third party reliance

Third party reliance happens when a 'third party' relies on advice that has been prepared for a member's client. See section 5.

Tort

The umbrella term for all civil wrongs recognised by law other than breach of contract. The most commonly referred to tort is the tort of negligence. See section 2.