Professional Indemnity Insurance in Construction

Construction projects often involve more than physical work on site. Designs, specifications, calculations, technical advice and project-management decisions can all affect how a project progresses and performs.

Where a business provides a professional service, an allegation that its work contained an error, omission or act of negligence can lead to a claim. Professional Indemnity Insurance, usually shortened to PI Insurance, is designed to help businesses manage the financial impact of these claims, subject to the terms, conditions and exclusions of the individual policy.

1. What is Professional Indemnity Insurance?

Professional Indemnity Insurance is designed to respond when a client or another party alleges that a professional service has caused them financial loss.

Depending on the circumstances and the policy wording, this may include legal defence costs and compensation associated with a covered claim. The precise protection will vary, so the individual policy documentation should always be reviewed to understand the scope and limitations of cover.

2. Why can PI exposures arise in construction?

A construction business does not necessarily need to describe itself as a consultant to take on a professional exposure. Responsibility can arise whenever a business provides or accepts responsibility for design, advice, specifications or other professional services.

For example, an issue might involve:

• An alleged error in a design, drawing, calculation or specification.
• Advice that is alleged to have been incomplete or inaccurate.
• An omission in professional information supplied to a client or project team.
• A failure in a professional service that is alleged to have caused delay, remedial work or financial loss.

Whether a particular matter is covered will depend on the facts of the claim and the terms of the policy.

3. Who may need Professional Indemnity Insurance?

PI Insurance may be relevant to businesses and individuals providing professional advice, design or technical services. Within construction, this can include:

• Architects and architectural practices.
• Engineers and engineering consultants.
• Construction and property consultants.
• Design-and-build contractors.
• Contractors that undertake or accept responsibility for elements of design.
• Other professionals providing specifications, calculations, project advice or technical services.

PI cover may also be requested under a client contract or as part of a business’s professional or regulatory requirements. The level and scope requested can vary between contracts and professions.

4. What are the potential benefits of PI Insurance?

Subject to the cover provided by the policy, Professional Indemnity Insurance may help a business respond to the financial and operational consequences of a professional claim.

Potential benefits can include:

• Cover for legal defence costs and compensation associated with a covered claim.
• Protection in relation to covered allegations of professional negligence, errors or omissions.
• Support for business continuity while a claim is being addressed.
• Helping a business meet applicable contractual or professional insurance requirements.

PI Insurance does not remove professional risk, and it will not respond to every circumstance. Limits, excesses, exclusions and other policy conditions will apply.

5. What information may be needed for a PI quotation?

A PI quotation is based on the professional activities and exposures of the individual business. Providing clear and accurate information helps an insurer understand the work being undertaken.

Information requested may include:

• The professional services the business provides.
• The sectors, clients and project types it works with.
• Annual turnover and the proportion relating to different activities.
• The qualifications and experience of relevant team members.
• Details of previous claims or circumstances that could give rise to a claim.
• The limit of indemnity required, including any contractual requirements.

Further information may be required depending on the nature of the business and its work.