Former Chesterton employees could be fined up to £5,000 and expelled from the RICS for operating without insurance.
The RICS professional conduct panel is investigating whether as many as 50 former employees of the collapsed agent have broken its regulations.
RICS members must carry professional indemnity insurance at all times, and are usually covered by their firm’s policy. But because Chesterton went into receivership, work undertaken there in the past was not automatically covered, unless entire teams and their business were taken to other firms and covered by PII there.
Any other former Chesterton employees were obliged to have “run-off” cover – the liability insurance required after a surveyor retires or the firm stops trading. Sources said some ex-Chesterton staff had been unable to get run-off cover because of the high cost of premiums.
Jonathan Davies, assistant general manager of St Paul’s Insurance, which specialises in PII, said: “The run-off premiums would have been at least £1,000 pa. But if the individual had been responsible for commercial lending valuations, for example, they wouldn’t have been able to get cover. It would have been far too costly because they could have been liable for claims of tens of millions of pounds, and wouldn’t have been able to pay a premium commensurate with the risk.”
Retired staff are also affected. Retired surveyors are usually covered by their firm’s insurance, but only as long as the firm is solvent and pays its premiums. If the firm goes under, the retired staff are no longer covered.
Before its final collapse, Chesterton was dogged by fears that the firm had inadequate insurance.
As a cost-saving measure, Chesterton had asked its insurers to allow it to pay a bare minimum premium. Because of this, the level of cover was allowed to drop below the company’s liabilities.
In 2004, the directors stated that they had “become aware of a possible professional indemnity claim”. They feared that the minimal cover taken out would not be sufficient to cope with the claim. The insurers were notified, but the directors did not increase the cover.
