This case study is an anonymised composite based on publicly reported PI claim patterns. It is not actual Apex client data and does not constitute legal or insurance advice. Names, locations and identifying details have been changed. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.
A two-surveyor practice in a south-west market town, fee income around £420,000, with a workload heavily weighted to residential survey work — predominantly Level 2 (Homebuyer) and a smaller number of Level 3 (Building Survey) inspections for the local sales market. Both principals are RICS-registered with long careers in the area.
The clients were a young couple buying their first home — a 1930s end-of-terrace property in a residential suburb. They commissioned the firm to undertake a RICS Level 2 Homebuyer Report; on the firm’s standard advice they did not upgrade to a Level 3 Building Survey, on the basis that the property was a relatively standard suburban house with no obvious cause for concern.
The inspection was undertaken by the more junior of the two principals on a busy day with two other inspections scheduled. The report identified routine defects of the age and type — some minor pointing repairs, a need to address some external decoration, low-level damp patches consistent with the property’s age — and gave the property a generally satisfactory overall rating with the qualifications appropriate to a Level 2 report.
What the inspection did not engage with adequately was a pattern of cracking at the gable end of the property that, on the photographic evidence later assembled, was visible at the time of inspection. The cracking was diagonal, stepped through the brickwork, and pattern-consistent with progressive subsidence. The surveyor had observed the cracking, noted it in his field notes as “historic cracking, monitored”, but had not engaged with the question of whether it was historic or progressive — there was no documented test against the property’s structural movement history or any recommendation for a specialist investigation.
The clients purchased. Within eighteen months they observed worsening of the cracking and instructed a structural engineer who identified progressive subsidence requiring underpinning works estimated at approximately £85,000, plus consequential redecoration and a period of disturbance during works.
The clients’ claim was framed as breach of the surveyor’s duty of care under Smith v Eric S Bush [1990] 1 AC 831 — a duty owed by a surveyor producing a report knowing that the buyer would rely on it for the purchase decision, irrespective of the contractual route by which the report was commissioned. The standard against which the survey was assessed was the Bolam standard applied in the surveying context: the conduct of a reasonably competent chartered surveyor undertaking the type of inspection commissioned.
The expert evidence on both sides agreed that a reasonably competent Level 2 inspection should have engaged with the visible cracking sufficiently to make a clear written recommendation for specialist structural investigation before proceeding. The firm’s expert pointed out — correctly — that a Level 2 report is not a structural survey and that the firm was not retained to investigate the cracking; the claimant’s expert pointed out — also correctly — that the duty in a Level 2 report includes flagging matters that warrant further investigation, and the cracking met that threshold.
Quantum was approximately £92,000 (underpinning works, redecoration, disturbance allowance, and the diminution in value of the property at the date of purchase had the defect been known, applying the Watts v Morrow [1991] 1 WLR 1421 measure of damages framework).
Section 5 notification was made on receipt of the clients’ pre-action letter. The firm’s wording responded subject to the firm’s £5,000 excess. The £1m limit was comfortably sufficient.
The wording question on this matter was straightforward but worth setting out for general buyer education: the firm’s policy was a “claims-made” policy responding to claims first made against the insured during the policy period. The report had been issued some three years before the claim was made; what mattered for cover was when the claim was made, not when the report was issued. This is the standard architecture of all UK PI policies and produces an important obligation: a surveying firm that ceases to trade or changes its risk profile must maintain run-off cover for an appropriate period after activity ceases, typically six years to match the contractual limitation period and longer if Building Safety Act issues might arise.
The matter resolved without litigation through pre-action correspondence and a single negotiation meeting at approximately £74,000 inclusive of the clients’ costs.
The settlement was paid. The principal surveyor undertook additional structural diagnostics CPD and the firm introduced a documented prompt-list for the inspection of cracking and movement indicators on every report. The firm’s PI premium rose by approximately 22% at renewal — a modest impact for a clean notification and prompt resolution. The firm retains its book of work.
Missed-defect claims on residential reports are the highest-volume claim type for general surveying practices. First, the question is rarely whether a Level 2 report should have diagnosed a structural defect — it is whether the surveyor should have flagged the defect for specialist investigation. The duty to flag is broader than the duty to diagnose. Second, field notes that record an observation without engaging with it are problematic in litigation; the file should evidence the surveyor’s reasoning, not just the surveyor’s eye. Third, the firm’s procedural prompt-list — the standardised inspection checklist applied on every inspection — is the most cost-effective single investment in claims prevention. Fourth, run-off cover after retirement or sale of the practice is not optional; the limitation period for residential survey claims is six years from breach (and longer where Building Safety Act issues arise on multi-occupied residential properties). Fifth, the firm’s renewal disclosure should pick up not just formal claims but circumstance notifications and the firm’s broader caseload and engagement profile; underwriters value granularity.
For a one or two-surveyor practice, the most important conversation we have is about the architecture of the cover — limit, excess, run-off — calibrated to the firm’s actual work mix and exit plans. On a clean missed-defect claim the broker’s role on notification is largely procedural but worth doing well: framing the section 5 notification cleanly and ensuring the file evidence is assembled and shared with the insurer’s claims handler quickly. At renewal, the firm’s modest claims history and the documented procedural changes are the substance of the underwriter’s view — and the difference between a 22% rate movement and one closer to 35%.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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