professional indemnity
Richard Webb DIRECTOR MANCHESTER UNDERWRITING MANAGEMENT PI for contractors
“Why do I need PI?” - an often heard question from contractors with no in-house design teams and who may never employ consultants, building solely to the designs and supervision of others. MUM’s Richard Webb explains why such a contractor can find itself being asked to purchase PI cover even though it undertakes no professional work itself
W
hy should a contractor buy a professional indemnity policy? Some contractors have always had design departments that required PI, but the last 25 years has seen an increase in the Design & Build contract. This is popular with the employer, who can wrap all the design and building contract terms into just one document with one party, who takes responsibility for all design and building. This type of contract is used on all sizes of projects
from housing to major civil construction.
The downside of a Design & Build contract is that the employer, being once removed from the design sub- consultants, might find that they have less input to the design process, leading to unfulfilled expectations where a contractor might focus more on cost than design.
A contractor that takes on design liability - whether the
design is undertaken internally or sub-contracted to outside consultants - has a need for PI. The employer normally insists on PI being carried, as well as an array of collateral warranty agreements creating a direct contractual link between sub- consultants and the employer, facilitating litigation in the event of things going wrong. In this way, a contractor might find themselves being asked to purchase PI cover even though they undertake no professional work themselves. These design exposures can be encountered by any type of
contractor, from the major household names and general building firms through to specialist sub-contractors such as piling, roofers, cladding and glazing, building services contractors etc. Unused to buying PI, contractors can face unpleasant cost surprises when arranging the cover. A good example of how liability can arise appears in the adjacent panel. Such a claim situation is not uncommon. The PI market normally calls a policy purchased by a building or engineering contractor a ‘D&C policy’, or Design & Construct. Such a policy should protect the contractor, as well as where the
12 insurancepeople MARCH 2011
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