20 Apr The Importance of Professional Indemnity
The Importance of Professional Indemnity
Construction industry professionals such as Contractors and Builders who provide design or other professional services in addition to or as part of their construction activities for clients, assume the additional responsibilities and liabilities of a design professional. Claims against Design & Construct Contractors almost always involves professional (e.g. design) and non-professional (e.g. workmanship) services. The problem is that where there are two or more proximate causes of a loss and one of those causes is excluded, then legally the entire claim may be excluded!
Why do I need Professional Indemnity?
Whether or not you provide these professional services in-house or engage an external consultant, you assume liability to your clients or other parties for claims arising out of injury or loss incurred as a result of a breach of professional duty in the provision of these professional services. Many “smaller” builders are becoming increasingly aware of this exposure (realising it’s not just something for the larger builders), and are therefore including the requirement for professional indemnity insurance in their design and construct tender documents.
CRM’s Risk and Related Services program can help you in this area.
Real Life Case Study
A building surveyor was engaged to issue a building permit and the required certificates, including the final Certificate of Occupancy for a residential construction. Some years after completion of the house, the owners noticed significant movement and cracking. The owners sued the contracted builder and the home warranty insurer. The contracted builder joined the builder to whom it had sub-contracted the works. The sub-contracted builder then joined engineers, the manufacturer of the footing system, the installer of the footings and the building surveyor. The allegations against the building surveyor were that he was negligent in issuing the permit and certificates because he should have recognised the deficiencies in the various engineering plans, designs and computations. He asserted that it was not the role of a building surveyor to check such documentation, rather, his duty was to certify that the steps required under the Building Act had been carried out by the appropriate registered building professionals.
The other parties alleged that because the deficiencies were obvious on the face of the design documents and certificates, the building surveyor was liable.
After four years of litigation (and significant legal costs) the claim settled for over $1million with the building surveyor contributing a proportion of that sum.
The example is intended to illustrate broadly some, but not all, of the kinds of exposures Builders (small and large) and Construct Consultants can face. How the various Insurers’ policies respond to any circumstance will depend on the particular facts and their policy wording. That’s where we step in.
We can offer Professional Indemnity extensions for either ‘Design & Construct’ or ‘Construction Consultants’ which can be access from our website links below:
Please do not hesitate to call CRM Brokers to discuss your specific Insurance needs further.
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