What is construction professional indemnity insurance?
As a business owner or contractor, you want to protect yourself from any potential allegations of professional negligence. That's where Professional Indemnity Insurance comes in. Also known as Design and Construct Professional Indemnity Insurance, this commercial policy is designed to safeguard business owners, contractors, and the self-employed against claims arising from professional negligence. Whether it's due to inadequate services or subpar materials, this insurance can help cover the costs of damages and legal fees, so you can focus on running your business.
As the number of claims from the UK construction sector increases, and disasters such as the Grenfell tragedy occur, the professional indemnity insurance market has hardened. A hardening of the market means insurers are raising premiums, reducing indemnity limits, and adding more restrictions and exclusions. As a result, it becomes tempting for other brokers and construction businesses to overlook this policy type, leading to a professional indemnity crisis.
- Q3 2021 – surveys reported a 54% cost increase in PI insurance
- Accompanying covers like Directors & Officers Insurance similarly increased by 61%
- More restrictive clauses and terms are being written into policies
- Brokers with limited markets can struggle, and you might be late receiving renewal terms
Here at PIB we are one of the largest brokers in the country and have dedicated schemes and solutions:
- Specialist PI team with focus on architects, accountants, engineers, construction, surveyors
- Free independent review of your existing policy, covers, clauses and endorsements
- Any One Claim policies
- Products offering Basement, Fire and Cladding cover
- Options for Collateral Warranty and an Appointment Review Service
What does Professional Indemnity Insurance cover in construction?
As a professional, you may be held liable for any damages or losses your client suffers as a result of your work. Professional indemnity insurance can help cover your legal costs and expenses incurred during your defence, as well as any damages or costs awarded against you. There are many things that can go wrong with a building, and often it is not just poor workmanship that is to blame. Sometimes, the design of the structure itself can be at fault. For example, a concrete beam that begins to fail may be the result of a design flaw, rather than simply bad construction. When it comes to defects, Public Liability (PL) insurance usually covers issues where workmanship is the cause of the defect, rather than Professional Indemnity (PI) insurance.
Who needs construction Professional Indemnity Insurance?
There are a wide range of construction specialists who would typically require PII such as:
- Cladding Contractors
- Commercial Builders
- Electrical Contractors
- Electrical Engineers
- Heating and Ventilation Engineers
- Mechanical Engineers
- Specialist Subcontractors
What is Design and Construct Professional Indemnity Insurance?
As more and more businesses employ their own in-house design professionals or subcontract the design work, they are assuming greater liability for any errors or problems that may arise.
When you undertake contracts on a design and construct basis, it is you who will be the client's target in the event of a design related problem. Even if a claim is ultimately the responsibility of another party, the costs of redirecting the liability can be high and success is far from guaranteed. You will be responsible regardless of your ability to enforce an action against the negligent party. This is where a Design & Construct (or Design & Build) PI insurance policy comes in - protecting your finances and your relationship with your client.