In a Landmark test case, Merrett -v- Babb, the Court of
Appeal has ruled that employees will constantly be vulnerable to claims
brought directly against them for advice given on behalf of their employers.
The appeal was brought by a Mr John Babb, a member of the RICS. Following
the insolvency of his former employer, Mr Babb found himself personally
liable for a mortgage valuation that he had carried out over seven years
earlier. The Court of Appeal's ruling will impact upon all sectors and
professions where employees give specialist advice to clients on behalf
of their employers. Professional employees will be particularly vulnerable
if their firm or company:
-
has ceased trading and has no run-off cover;
-
is under-insured and cannot meet the full claim;
-
is unable to pay the excess due under the policy;
or
-
is unable to obtain indemnity from their professional
indemnity insurers
as a result of a coverage dispute.
The Court of Appeal emphasised that prudent employees
- whether professional or otherwise - should ensure that their employers'
insurance covers them personally and that such employees may need to
take steps to obtain personal insurance if that cover did not continue
after their employment ended. Whilst the Court of Appeal's observations
are highly relevant, such insurance cover is not, as a practical matter,
presently available to former employees.
The remuneration that employees receive is not commensurate
with the risk of attracting a personal liability and such an exposure
is unlikely to be contemplated by them. If the majority decision of
the Court of Appeal stands, it will leave all employees who provide
specialist advice - whether professional or otherwise - exposed to personal
liability. Professionals in small firms are likely to face the greatest
exposure.
|