|Design and Construction|
Contractors with a design liability
When you undertake contracts on a Design & Construct basis, you will almost certainly be the client's first port of call in the event of a design related problem. Even if a claim is ultimately the responsibility of another party, the costs of redirecting liability can be high and success is far from guaranteed.
As there is no professional body for contractors, there is no recognised qualification or specific standard of insurance coverage. It is for this reason that insurers have to pay careful attention to the qualifications and experience of the principals and staff of a business.
If a contractor is offering professional services, insurers will expect to see qualified staff, such as a qualified architect, engineer or surveyor. If there are no qualified staff, insurers will want to see CVs for those involved in technical work, and these CVs should normally demonstrate at least five years' practical experience, and maybe more depending on the services offered.
Insurers will be particularly interested in the types of projects and the sectors in which the contractor is involved. The following demonstrates how insurers would typically view areas of work:
Insurers are particularly interested in ascertaining from which discipline income is derived, for example, architectural, civil and structural engineering, surveying, mechanical and electrical engineering, heating and ventilation engineering, chemical engineering, soil engineering and nuclear engineering.
Other areas of interest for underwriting purposes include:
You will be asked to further clarify the extent of you exposure to design-related claims and for a breakdown of turnover and fee income. Examples are:
Some standard PI policies are not adequate for contractors with a design liability. There are a number of reasons for this:
The operative clause of a D&C policy is generally very restricted. Insurers want to cover only professional exposures and do not want to end up paying for poor workmanship on under-priced contracts. So, cover is normally limited to design or specification, feasibility study, technical information calculation, surveying undertaken only by or under the direction and direct control of a properly qualified architect, engineer or surveyor.
Supervision cover will normally be limited to situations where the insured is not supervising their own or their sub-contractors' workmen in their contractor capacity. Other professional activities that are intended to be covered will normally need to be endorsed separately.
Usually the limit of indemnity for contractors will be 'aggregate' with legal costs inclusive within the limit of indemnity. However, it is not unknown for 'any one claim' limits to be available with legal costs in addition. The excess will normally apply to insurers' costs and expenses (see costs in addition and costs inclusive).
As cover is not normally provided for on a 'civil liability' basis, additional cover for liability for lost documents and libel and slander will usually need to be added, so comparisons between wordings being offered by different insurers is needed.
Design and construct policies demand careful attention to exclusions. Typically, policies will exclude:
The presentation of your business to insurers is very important both in respect of the facts i.e. the things for which cover is required, and the way in which you do your business, both of which influence an insurer's perception of your business and the risk it poses to them.
We would always recommend that in addition to the proposal form you are asked to complete, you provide supporting documents with your proposal such as:
Don't forget to include the names of any businesses with which you have merged, or any that you have acquired, as these will need historic cover. Likewise you may have ceased to offer certain services for which cover is still required.
Keep a written record of all requests for cover to be extended and any historic or material changes to your business. This information can be updated each year and provided as an addendum to the proposal. Any certification the business may have i.e. accreditation by a governing or standards council, is also well worth disclosing.
Keep your presentation neat and tidy. Bear in mind that an untidy presentation may be construed as an untidy business. Allow yourself time to complete the presentation and remember that a hard copy always look better that a faxed one sent in at the last minute.
The Professional Indemnity Insurance market is relatively small so at the point of renewal, concentrate on asking only one or two specialist brokers to quote. Bombarding the market with requests can result in your proposal being locked out of some markets.
Renewal is an ideal time to review your insurance requirements. As your business grows and your contract values increase, it is wise to consider what could go wrong and how much it may cost to settle a claim - and also cover the attendant legal costs. Some policy wordings provide a limit of indemnity with legal costs in addition to the limit. Others provide limits of indemnity which include the legal cost. However, the cost of litigation is high and can eat into the limit of indemnity provided if costs are inclusive.
Download and return a signed copy of this PI Proposal Form
|Choose your Profession|
|Online PI Quotes|
|Submit Proposal Form|
|Register Renewal Date|
|Directors and Officers|
|Employment Practice Liability Insurance|
|Run Off PI|
|DAS Legal Expenses Cover|
|PI Fact Sheets (New)|
|Register your Renewal Date|
|Submit Your Proposal Form|
|Hammond Legal Resources|
Click on the image below to download our proposal form.
Once completed you can upload the proposal form here or by logging in and using the Manage Proposals section to the left.
Like and follow us on Facebook, Twitter and LinkedIn in order to stay up to date with the latest news relating to Professional Indemnity.