Professional Indemnity Insurance for Construction

PROFESSIONAL INDEMNITY: A GUIDE FOR THE CONSTRUCTION INDUSTRY

What is Professional Indemnity insurance? 

Professional Indemnity Insurance (PI insurance) protects against financial losses from liability claims made by a client against an individual for alleged errors relating to their professional work. PI insurance typically covers a range of risks including professional negligence, errors in work, copyright infringement and loss or damage to client documents.  

Who needs Professional Indemnity insurance?  

Any business or sole trader providing professional consultancy services, advice or design work to clients is strongly advised to take out Professional Indemnity insurance. If a client suffers financial losses relating to work carried out by a business or sole trader, they may seek to recover those costs by making a liability claim.  

Professional Indemnity insurance is mandatory for members of some professional bodies and is required by some regulators. This includes solicitors, financial advisers, accountants, architects and some healthcare professionals. 

Builders & Contractors  

Professional Indemnity insurance for builders and contractors is strongly advised to cover any claims of professional negligence, incorrect designs or faulty work. Even if you are confident in the standard of your work, mistakes do happen and some clients may make unfounded claims that require a costly legal defence. 

Contractors should ensure they have a policy that provides cover specific to construction projects (sometimes referred to as construction professional indemnity), as some standard PI policies may exclude claims relating to incorrect designs, installation, building or maintenance work.   

Structural Engineers & Architects 

Professional indemnity for structural engineers is a requirement of the profession, due to the potential high cost of indemnity claims for faulty or incorrect work. Architect professional indemnity insurance is also required by the Architects Registration Board (ARB).  

Consulting engineers, civil engineers and any other professional involved in designing or providing consultancy for construction work should also ensure they have PI cover to protect themselves against liability claims.  

Claims can arise from a variety of scenarios, from design faults and technical document errors, to alleged negligence and intellectual property infringement. Those working on high-risk engineering or construction projects such as schools, medical centres, sports stadiums and other key infrastructure should take extra care to ensure their PI policy provides adequate cover for liability claims.  

Surveyors 

Surveyors are exposed to numerous risks due to the range of professional duties they carry out. When working on large projects, or those of high financial value, errors in work can have serious financial consequences. Surveyors professional indemnity insurance can protect an individual or firm from liability claims relating to alleged errors in a survey, inspection or valuation. PI insurance for surveyors can also cover claims relating to breach of contract, bodily injury and property damage.  

Surveyors professional indemnity insurance is also required by the Royal Institution of Chartered Surveyors (RICS) and it is highly recommended to insure through a broker with specialist knowledge of the sector.  

How much cover do I need? 

The level of professional indemnity cover required depends on many factors including your profession and the sector you are operating in. Construction is generally seen as a high-risk industry for indemnity claims, and some areas of construction and engineering (for example, railways, roads, bridges, tunnels, water and sewage systems) are considered higher risk projects. Often these projects have additional complexities and the potential consequences of mistakes made at any level can be severe, therefore higher levels of PI cover will be needed.  

Some regulators require a mandatory minimum indemnity, for example, the Architects Registration Board (ARB) rules require a minimum limit of indemnity of £250,000 for every claim.  

Tysers have many years of experience insuring the construction industry. If you are unsure on the level of cover you need, contact our specialist construction team who can evaluate your individual risks and advise the recommended level of cover.  

Other covers to consider 

Companies involved in construction projects will require various covers depending on the size, scope and risks associated with the work undertaken. All risks from design to completion should be considered, and adequate policies put in place to protect against potential claims from both employees and third parties.  

Combined Liability Insurance 

Most construction projects will require several types of liability insurance protection. A Combined Liability policy covers Employers Liability, Public Liability and Products Liability under a single policy. 

• Employers’ Liability (EL) insurance with a minimum cover of £5m is a legal requirement for any UK business, although many policies offer a higher level of cover as standard. EL insurance is designed to protect the businesses of any size from claims of injury or illness made by employees. 

• Public Liability insurance for construction covers third party claims of injury or damage to property from the public. Third-party claims are one of the most common claims made against contractors in the construction sector so it’s crucial to have cover in place.  

• Products Liability insurance protects against third-party claims for injury or damage caused by any products manufactured, designed, or supplied by a business. This cover provides important protection for any contractor, subcontractor or sole trader who supplies building products or construction materials of any kind.  

Contractors’ All Risks Insurance 

Contactors’ All Risks Insurance can provide cover for permanent and temporary works, including site materials. Policies can be designed to include various covers which are necessary to meet contractual obligations including: 

• Project Insurance provides cover for all contracted parties on a specific project policy and is often more comprehensive and cost-effective than purchasing several individual policies. Cover typically includes Public Liability Insurance, Non Negligence Insurance and Works Insurance but doesn’t include Employers Liability or Professional Indemnity.  

• Contract Works Insurance provides comprehensive cover of the Works from commencement date through to completion, with the option to extend cover (subject to agreed conditions) to provide ongoing protection to completed properties.  

• Hired In Plant Insurance protects against damage to, or theft of, any hired in plant and equipment whilst on any sites defined in your policy. Cover typically includes the main works site/s and policies can also be extended to include your own storage facility. 

• Structural Warranty insurance (also known as Latent Defects Insurance) protects the owner against the cost of rectifying structural defects of the owned building. A Structural Warranty must be purchased in advance of completion and typically lasts 10 years from original construction.  

Contact us 

Tysers brokers have extensive knowledge of the construction industry and can advise on the best Professional Indemnity insurance cover for your needs. We can arrange cover for construction firms, contractors, builders, engineers, architects, surveyors and others working within the construction industry.  

To find out more, or get started with a new policy: 

Get in touch