Design and Construct professional indemnity insurance is a specific type of professional indemnity designed to protect the professional activities of all types businesses within the contracting industry.
Do I need Design and Construct Professional Indemnity insurance?
Any business in the contracting industry that incorporates an element of design or specification within their work, whether or not the design or specification work was carried out by another party, may have a liability for the consequences of errors or omissions in the design or specification and have a risk exposure that can be insured by a Design and Construct professional indemnity insurance policy.
Is design and construct covered by my Public Liability insurance?
Design and Construct professional indemnity insurance covers risks that public liability does not.
A standard public liability insurance covers legal liability for injury to third parties or damage to third party property, and contains an exclusion for claims arising advice, design or specification for a fee.
Design and Construct professional indemnity insurance covers claims arising from advice, design or specification and is not restricted to legal liability arising from injury or damage, i.e. it covers legal liability for pure financial losses.
What does Design and Construct Professional Indemnity insurance cover?
Design and Construct Professional Indemnity insurance covers the insured against its legal liability for damages, costs and expenses arising out of the Insured’s Professional Activities.
Unlike some types of professional indemnity insurance that will cover any ‘civil liability’ arising from the insured activities reasonably undertaken as part of the business description in the policy, Design and Construct professional indemnity insurance covers claims arising from negligence and the Professional Activities covered are specified. Additionally there is a requirement for the Professional Activities to undertaken or supervised by a suitably qualified or experienced person. The Professional Activities would typically be:-
- design or specification
- supervision of construction
- feasibility study including work in relation to applications for planning consent
- technical information calculation
- CDM co-ordination services or planning supervisory
in connection with the Business undertaken only by or under the direction and direct control of a qualified architect engineer surveyor quantity surveyor or other person having other relevant professional qualifications appropriate to the work undertaken or having a minimum level of experience of five years in undertaking such work.
To stress the professional nature of the cover the definition of professional activities will contain a clarification that general supervision of works is not covered. An example of this clarification is:-
‘For the avoidance of doubt Professional Activities and Duties do not include supervision by the Insured of their own or their subcontractors’ work where such supervision is undertaken in the Insured’s capacity as building or engineering contractor and the Insured has no responsibility under the contract for provision of design Such supervision will however be included within the Professional Activities and Duties whenever the Insured has provided all of the design element of their building or engineering contracts or sub-contracts.’
The Design & Construct professional indemnity can also contain a number of additional covers or extensions such as Breach of Confidentiality, Infringement of Intellectual Property Rights, Dishonesty, Libel and Slander, Loss of or Damage to Documents, Mitigation of Losses and Joint Venture or Consortium Clause.
What cover can I expect under a design and construct policy?
As with any other professional indemnity policy, cover is on a ‘claims made’ basis. This means that the policy only covers claims made and reported to the insurer during the policy period. If the cover is lapsed or cancelled, there is no cover for any claims made after the cessation of cover even if the claim arises from work undertaken during the period of cover.
The limit of indemnity provided is on an ‘Aggregate’ basis, which this is the most the insurer will pay in respect of any one claim and in any one period of insurance. On this basis of cover, the limit of indemnity is eroded by claims and the erosion can be protected by:-
- Increasing the limit of indemnity, which will increase the any one claim and any one period of insurance limits
- Including one or more ‘Reinstatements’, which will not increase the any one claim limit but will increase the any one period of insurance limit.
An excess is usually applicable to each and every claim, and this can be a significant sum dependent upon the activities and size of the business.
For a straightforward risk, cover is readily available from a wide range insurers, you can apply on-line or a completed proposal form may be required.
As a risk gets more complex or hazardous the choice of insurer diminishes, and a completed proposal and full risk details will be required.
An experienced and professional insurance broker is likely to be best placed to obtain suitable and competitive quotations.