Design & Construct Insurance

If you build it they will come

Litigation in the UK is on the increase. Today, clients have high expectations, whatever their field and they are well aware of their legal rights.

Contractors are being requested more than ever to provide Professional Indemnity as a contractual requirement or part of a tendering process.

Traditionally only professionals such as solicitors, surveyors and accountants needed professional indemnity insurance. However, in today’s litigious society, contractors’ businesses are at real risk of being taken to court over the services they provide.

From roofers to builders, electrical contractors and specialist construction contractors, First Insurance Solutions is here to help.

What is the difference between Public Liability (PL) and Professional Indemnity (PI)?

Business liability insurance comes in a variety of forms – Public Liability is designed to provide compensation in the event of bodily injury or physical damage to third parties. Professional Indemnity cover is designed to provide compensation for financial losses suffered by your clients arising from the advice, consultancy or services that you provide.

The Limit of Indemnity should be determined by considering the worst-case scenario i.e. the financial consequences if the design specification is wrong and how it impacts upon your clients.

Do Contractors Need Professional Indemnity Insurance?

Yes, if:

  • You have a contractual requirement for it
  • You operate under design and build contract conditions
  • You provide professional services in-house or have a responsibility to provide professional services to your client which has been sub-contracted out

Core areas of cover included

Rectification costs: Can be significantly higher than original construction costs, especially where phased rectification is required or knock on risks exist as is the case for ground works.

Consequential financial losses: Typically the most significant portion of a loss with little direct correlation to contract value.

Claims Examples

As a professional, you take pride in your work but here are a few examples of where it can go wrong:

Through no fault of the contractor, the client was unhappy with the work and alleged negligence in the design of a heating and ventilation system.

A contractor designed and supervised the installation of the mechanical and electrical services in an office block. Operational difficulties became apparent with the air-conditioning, allegedly due to a design fault.

Electrical services were designed for a factory unit. The client alleged that the lighting was inadequate and did not comply with the relevant regulations.

The design of a machine proved inadequate to cope with the weight of items being produced.