An insurance specialist has warned of a rise in claims made against agents because of the number of people trying their luck via ‘ambulance chasers’ – with some complainants being regular users of ‘no win, no fee’ law firms.
Oliver Wharmby, who deals with a number of agents via his firm Lonsdale Insurance Brokers, warned: “We are seeing a rise in serial litigants.”
Wharmby also said letting agents are far more likely to make insurance claims than estate agents – representing around 75% of all PI claims in the agency sector.
Agents make PI claims when they have had claims made against them.
The highest PI claim, according to Wharmy, falls into the “breach of duty” category.
The second highest claim, however, is to do with personal injury.
Wharmby said this reflects the influence of ‘no win, no fee’ law firms.
He told of one case where a managing agent had a claim against him by a landlord.
The tenant in the property fell down the stairs and blamed this on a faulty light which had been previously reported.
The tenant sued the landlord and the landlord sought to recover their loss from the agent.
The agent’s insurers successfully defended this claim, putting the onus back on to the landlord.
In that case there was no pay-out, although the insurers covered the costs of investigation, but in another, the insurers paid out some £30,000.
Here, the agent – a part-time Saturday employee – handed over keys to a tenant who had passed reference checks by an external referencing company.
The tenant emailed a scan of their passport, later identified to be counterfeit.
The tenant also managed to persuade the employee that they would pay all monies including the rent and deposit via same-day bank transfer in the agent’s own office, which they did using a false web page showing monies leaving their account.
No funds were ever received, and by the time the agent realised, it was too late, and the tenant was in the property.
Unknown to the agent, the tenant had previously taken up three tenancies with other local letting agents using false documentation and information.
Further background checks revealed that the tenant had also served a prison sentence for fraud.
The landlord brought a claim against the agent and some six months later the tenant was evicted and the estimated cost of loss of rent, legal fees and refurbishment for the property amounted to between £25,000-£30,000.
The letting agent only paid his £500 excess and the rest was picked up by insurers.
Wharmby said: “Professional Indemnity is often seen as an unnecessary evil. However, a PI policy will cover the insured for costs and expenses in defending a claim, regardless of whether the claim has any substance.
“We trade in an environment that is increasingly litigious, and recent legislation has brought in a new and very real risk of claims being brought against property professionals.”
The broker’s full report makes for interesting reading and comes complete with warnings about the rise of cyber-fraud directed at agents.