The need for professional indemnity (PI) cover has grown over the last 10 to 20 years, as more people enter professional, service-based, occupations. Contractors often resist buying PI insurance, mistakenly believing that they have no exposure to PI claims. The need for PI is often driven by contractual requirements, including any collateral warranty (duty of care) agreements that seek to establish a direct contractual relationship between employer-client and the sub-contractors and sub-consultants.

PI insurance safeguards against catastrophic losses in the event of legal action due to a negligent act, error or omission by the ‘professional’.

Who needs PI cover?

It is appropriate cover for anyone who gives advice, makes educated recommendations, designs solutions, or represents the needs of others. Professionals within the construction sector, accountants, engineers, IT consultants, software developers, planners, estate agents and contractors will often carry PI insurance. This can be due to the following:

• Many professional organisations, such as the Architects Registration Board, requires its members to have PI insurance before they can practice
• It is contractually required by the customer
• It provides extra protection against potential legal costs and expenses

The construction sector

Miles Smith has vast experience in providing professional indemnity solutions to the construction sector. In this area of business it can often be the case that the main contractor or project manager may seek to attribute errors to ‘bona fide’ sub-contractors when something goes wrong with a project or development. However, in reality, the responsibility lies with the main contractor and/or project manager, even if they claim to have no responsibility for the ‘design’ or ‘specification’ element of the risk.

The client is rarely concerned with who caused an issue that occurs, they simply want someone to pay for their perceived financial loss. Therefore, often Design & Construct claims will ultimately rest with the ‘last man standing’.

There are many reasons why a sub-contractor cannot be relied upon to provide indemnity to the client, following a financial loss as a result of an issue with a construction project, including:

• Sub-contractor ceasing to trade or going into liquidation
• Not maintaining “run off” cover for departed firms
• Their PI insurance being inadequate, non-existent or defective in some way (e.g. insufficient policy limits)
• Breach of warranty or policy condition
• Disputes between the parties as to who was responsible for the design

Newer or innovative types of design (such as modular or off-site built prefabricated units) can lead to a new type of PI claim.

Miles Smith’s in-house PI facilities will cover defective workmanship claims if they derive from negligent design or negligent specification.

How Miles Smith can help you

Contractors frequently have a need for advice before signing a collateral warranty or duty of care agreement. Both of our in-house PI schemes provide a free vetting service from the insurer’s panel lawyer.

Miles Smith’s professional indemnity team can provide cover for almost all classes of profession (other than solicitors and financial advisers).For more information on how we can help you place PI business, please click here.