Professional Indemnity Insurance for Builders
This coverage protects you for legal actions arising from Design issues with your buildings.
Building or Construction companies invariably are dealing with the Developer or Building Owner. The builder is invariably held responsible for issues if they arise. It must be remembered that the commercial customer relationship is not held with sub-contractors. It is between the builder and the builder’s client.
Typically, a builder will be performing work based on the Design given to them by the Architect or Engineer. An issue can arise when there is a potential claim relating to Defective Design. Normal builder policies that cover Material damage or liability policies, will have exclusions specifically relating to Defective Design. They do not provide full coverage for a building failure as a result.
If there was a design issue, a builder will need to take an action against the contractor. However, when the subcontractor or consultant then denies liability, which has occurred, or they discontinue trading, the ripple effects can be massive.
In order to ensure you are protected, you can taking out a Builders PI policy. This means that any legal costs you incur, or any damages awarded against you due to defective design, can be covered.
Without having your own coverage you are reliant upon your sub-contractor or consultant making payment to the Property Owner.
An example of an issue due to having no Professional Indemnity cover and relying upon your consultant to pay is as follows:
A builder follows the Architects advice, and puts a coating over some floor tiles to protect and enhance the appearance. Subsequently, cracks appear, and the Architect blames the builder for poor workmanship. Builder denies this, but the owner sues for $ 1 million.
The evidence eventually reveals itself that the cause of cracking is a design issue. As standard Damage and Liability policies do not cover Design, you incur $ 120,000 in legal fees in attempting to sue and recover costs from the architect.
You should strongly builders consider this coverage when involved in any (but not limited to) of the following activities.
- Any design modification at the behest of the owner
- When you are also held responsible for your consultant architect or engineer actions
- Design and Construct
- Project Construction Management
- Building Design
- Design interpretation and drafting
If as a builder you engage consultants, you are then exposed to any liability that results from that consultant’s work or advice.
For a discussion and insurance quote for your Builder Professional Indemnity insurance, please contact us today.