K/S Lincoln v CB Richard Ellis Hotels Ltd [2010] EWHC 1156 (TCC) is a leading modern statement of the permissible margin of error in valuation. A valuation is an opinion, and two competent valuers can honestly reach different figures. The law therefore does not treat every deviation from the true value as negligence. A valuation is negligent only if it falls outside the range a reasonably competent valuer could have reached, having exercised proper skill and care.
The court indicated that a permissible margin of around 5 per cent either side of the correct figure is appropriate for a standard residential property, around 10 per cent for a property with unusual features, and up to 15 per cent, or occasionally more, for a property with exceptional features or a difficult market. These are guides rather than rigid rules, but they frame how courts approach the question.
There are two stages. First, the court decides the correct value and the permissible bracket. If the valuation falls within the bracket, it is not negligent, whatever the process. If it falls outside, the court then asks whether the valuer failed to exercise reasonable skill and care. A valuation outside the bracket is strong evidence of negligence but does not by itself prove it.
The margin of error is central to how valuation claims are defended and reserved. Apex explains the interaction between the bracket, defence costs and the limit on its surveyors' PI guide, and the related exposures for cost consultants on the quantity surveyors' PI guide. Understanding the bracket is understanding where the real exposure sits.
In practice the bracket does more than decide liability; it drives the arithmetic of the claim. Because damages in a negligent overvaluation claim are measured against the correct value rather than the negligent figure, and because the permissible margin sets the range a competent valuer could have reached, the sum genuinely in dispute is often narrower than the headline shortfall. Two experts arguing over a 5 or 10 per cent bracket can move the recoverable figure substantially.
That is why valuation claims are heavily expert-led and why defence costs are a material part of the exposure. A firm should understand whether its policy provides costs in addition to the limit or costs inclusive, because a fought valuation claim can consume a significant part of the limit before any damages are paid. The bracket is the reason these cases reward careful, well-documented valuation practice: a figure reached by an accepted method, recorded at the time, and sitting within the range is a strong defence.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.