The tragic events of the Grenfell Tower blaze in London have thrown into stark relief issues surrounding professional indemnity insurance for construction projects.
Design and Construct Professional Indemnity Insurance – Lessons from Grenfell
Liabilities – including the possibility of criminal proceedings – in the Grenfell disaster have yet to be determined, but it seems inevitable that considerably high-value claims are going to be made.
The situation underlines the sheer number of parties likely to be involved in the chain needed for any major design and construct project – from the project owner to architects, designers, engineers, and contractors.
Composite panelling within the insurance industry have been a problem for many years. The UK Fire Brigade have previously said that if there is composite panelling within the building, they will control the fire but will not necessarily put the fire out!
To the insurers, this is a problem as the fire needs to be put out to avoid further damage. It hadn’t been so much if a problem in the Professional Indemnity market until Grenfell happened as generally, composite panelling were seen as a fire risk rather than a construction risk.
Composite panels are designed to bring down the temperature of the property in the summer and provide extra warmth in the winter.
You will find that the majority of builders who have been involved in the domestic high-rise sector are now finding a major problem getting Design and Construct Professional Indemnity (D&C PI) insurance. Also, anyone not involved in putting up the panels or designing them have also been hit as some providers of Design and Construct professional indemnity D&C PI insurance have left the market altogether and hence rises in premiums.
What does this mean for Insurance in the Design and Construction sector?
The sector has changed, with rises in premiums and less insurers available to quote on D&C PI insurance. There are other challenges too:
Novation Agreement Pitfalls
- many a design and construct contract may be won when initial design work has already been done by the project owner’s own design team – and a suggested novation agreement involves your taking on the work already done by that team;
- novation agreements such as this may complicate issues of professional liability and the extent to which the original design team remain responsible for faults and errors which later emerge;
- the management and coordination of subcontracts is also an area in which both clients and design and construct professionals may encounter further risks of professional liability.
- your professional indemnity insurance needs to recognise and make clear where the respective liabilities lie between owners, design and construct professionals, and subcontractors.
The good news is that at Tasker Business Insurance we are well placed to help and assist with all of your placements.
How we can help
In summary, the most sensible solution is to make sure that everyone in the chain (i.e. the architect, designer, other contractors) have cover in place themselves to a similar limit of indemnity.
It also pays being with the most suitable insurance broker with access to the most appropriate markets. Unlike most other brokers, at Tasker Business Insurance, we can place directly into Lloyd’s and the London Market, which allows us to contact the most appropriate markets and gives us access across the sector.
If you haven’t had your renewal premium yet, you might be in for a big surprise. If you had your renewal premium through, have you been surprised? Why not work with Stuart Thake and Tasker Business Insurance, who know this market well and could potentially therefore save you money.
To find out more about our Professional Indemnity product click here.