Merrett v Babb [2001] EWCA Civ 214

Citation

• Full case name: Merrett v Babb
• Neutral citation: [2001] EWCA Civ 214
• Reported at: [2001] QB 1174; [2001] 3 WLR 1
• Court: Court of Appeal (Civil Division), England and Wales
• Judgment date: 15 February 2001
• Constitution: May LJ, Aldous LJ and Wilson J; decided by a majority, Aldous LJ dissenting

Facts

Mr Babb was an employed surveyor who managed a branch office of a firm of valuers. He carried out and signed, in his own name and with his own professional qualifications, a mortgage valuation report on a house that Miss Merrett was buying. The report did not identify structural settlement affecting the property.

By the time the claim came to be brought, the firm was no longer a viable defendant. Its sole principal had become bankrupt, and the professional indemnity insurance was cancelled without run-off cover being put in place. With no solvent firm and no policy to answer the claim, the purchaser sued the individual surveyor personally.

The purchaser had not seen the report itself, and did not know who had signed it at the time she bought.

Issue

Could an employed professional owe a personal duty of care in tort to a third party who relied on work he had carried out in the course of his employment, so as to be personally liable in damages, notwithstanding that the work was done for and in the name of his employer?

Decision

By a majority, the Court of Appeal held that he could, and was.

The majority reasoned that the purchaser was relying on the professional judgement of the person who actually carried out the valuation. Mr Babb had signed the report in his own name and with his own professional qualifications, and in doing so had assumed responsibility for the professional work it contained. The fact that the purchaser had never seen the report or known his name at the time did not displace that analysis, because reliance in this context is reliance on the professional carrying out the valuation for the lender.

Aldous LJ dissented, taking the view that liability should not fall on the individual employee in these circumstances. Permission to appeal to the House of Lords was refused, so the Court of Appeal’s decision stood.

The damages awarded were modest compared with the significance of the point: they represented the difference between what was paid for the house and what it was actually worth, and they fell to be paid by the surveyor personally.

Ratio decidendi

An employed professional who carries out and signs professional work in his own name may assume personal responsibility towards a third party who relies on that work, and may accordingly owe that third party a personal duty of care in tort. Employment by a firm is not, by itself, an answer to such a claim.

Why it matters for insurance

This is a case about what happens when the insurance is not there. Nothing in the judgment turned on insurance as a matter of law, but the reason the individual surveyor was sued at all was that the firm had become insolvent and its professional indemnity policy had been cancelled with no run-off cover arranged. The claimant looked for someone solvent to sue, and found the person who had signed the report.

Three practical points follow. First, run-off cover is not an optional extra when a practice closes, a partner retires or a sole principal dies or becomes insolvent. Professional indemnity is written on a claims-made basis, so once the last policy expires there is nothing to answer a claim about past work unless run-off has been bought. Many professional bodies require a minimum run-off period for exactly this reason.

Second, the definition of “insured” in the policy matters to individuals, not just to the entity. A well-drafted professional indemnity wording extends cover to past and present partners, directors, employees and consultants for work done on the firm’s behalf. Where it does not, an employee named personally in proceedings can find themselves without a defence being funded.

Third, individuals moving between firms should understand which policy would answer a claim about work they did at a previous employer. That is a wordings question, and it is one worth asking before a claim arrives rather than afterwards.

See also

• Henderson v Merrett Syndicates Ltd — concurrent duties in contract and tort
• Smith v Eric S Bush — the duty owed by a lender’s valuer to a purchaser
• Scullion v Bank of Scotland (t/a Colleys) — where that duty stops — buy-to-let purchasers
• Steel v NRAM Ltd — the limits of assumption of responsibility for a negligent misstatement

References

• Merrett v Babb [2001] EWCA Civ 214; [2001] QB 1174 (Court of Appeal, 15 February 2001)
• Smith v Eric S Bush [1990] 1 AC 831
• Henderson v Merrett Syndicates Ltd [1995] 2 AC 145

Frequently asked questions

Can an employee be personally sued for professional negligence?

Merrett v Babb shows that they can. The Court of Appeal held by a majority that an employed surveyor who signed a mortgage valuation in his own name had assumed personal responsibility for it and owed a personal duty of care to the purchaser who relied on it.

Why was the firm not sued instead?

Because there was nothing to sue. The firm's sole principal had become bankrupt and the professional indemnity policy had been cancelled without run-off cover being arranged, so there was no solvent defendant and no policy available to respond.

What is run-off cover and why does this case matter to it?

Run-off cover is professional indemnity insurance bought to respond to claims made after a firm has stopped trading, in respect of work done before it closed. Because PI is claims-made, without run-off there is no policy in force when a later claim arrives. Merrett v Babb is the standard illustration of who ends up carrying the loss when it has not been bought.

This page is insurance information for UK businesses, not legal advice. It summarises a reported judgment and explains why insurance buyers and brokers refer to it; it is not a substitute for reading the judgment or taking advice on your own facts. Case summaries are necessarily short and omit detail. Position stated as at August 2026.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.