Merrett v Babb [2001] EWCA Civ 214 is one of the more troubling authorities for individual professionals. Mr Babb was an employed surveyor who signed a mortgage valuation. The principal of the firm later became bankrupt, and the firm's professional indemnity cover was not available to the claimant. The Court of Appeal held that Mr Babb was personally liable to the purchaser because he had assumed personal responsibility for the valuation he signed.
The court applied the Hedley Byrne principle of assumption of responsibility. By carrying out the inspection and signing the report, the individual surveyor had assumed responsibility to the buyer who would foreseeably rely on it. That the surveyor was an employee, and that the client relationship was with the firm, did not sever the personal duty.
The decision means an employed or consultant surveyor can be personally exposed where the firm's cover fails, for example on insolvency or where run-off cover lapses. The individual's own assets are then at risk. It is a strong argument for confirming that PI cover is in place and continuous, and for understanding who is an insured under the firm's policy.
Merrett v Babb is a reminder that the person who signs the report carries a duty the law will enforce. Apex addresses the definition of the insured and continuity of cover on its surveyors' PI guide, and the parallel issues for agency staff on the estate and letting agents' PI guide. A considered placement confirms who is protected, not only that a policy exists.
Because a professional indemnity policy responds on a claims-made basis, the cover that matters is the policy in force when the claim is made, not when the work was done. Merrett v Babb crystallised precisely where that continuity broke down: the firm had ceased and its cover was not available, leaving the individual exposed. For a valuation practice, the answer is to treat run-off cover on cessation as a core part of succession planning rather than an afterthought, so that work carried out during the life of the firm remains protected long after it stops trading.
Individuals moving between firms should also understand that past work may be answered by the policy of a former employer, a successor practice, or by run-off, depending on how each transition was handled. Confirming who is an insured, and how cover follows the individual over time, is a sensible discipline for anyone who signs valuations. The exposure in Merrett was not exotic; it was an ordinary firm that simply stopped, with cover that did not follow.
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.