CROSS Safety Report
Professional indemnity insurance issues raise safety concerns
This report is over 2 years old
Overview
Several reporters have raised concerns in relation to significant cost increases and the introduction of new restrictions on professional indemnity insurance (PII) policies.
This is seen as a potential for the creation of concerning ‘gaps’ in the design process, as well as preventing companies taking on projects which could delay essential building safety work.
Key Learning Outcomes
For consulting engineers:
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Begin broker engagement regarding PII policy renewals at an early stage
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Work with your broker to ensure full and accurate business descriptions are given, with additional information including your firm’s risk management procedures
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Make sure that you understand if there are limitations and exclusions to your PII cover and, if so, what those limitations and exclusions are before taking on work or when the scope of work is altered or extended
For clients:
- When asking for evidence of professional indemnity insurance from those firms you engage, ensure any exclusions to scope of work are disclosed
Full Report
Find out more about the Full Report
The Full Report below has been submitted to CROSS and describes the reporter’s experience. The text has been edited for clarity and to ensure anonymity and confidentiality by removing any identifiable details. If you would like to know more about our secure reporting process or submit a report yourself, please visit the reporting to CROSS-UK page.
One reporter says that insurers excluding certain activities, particularly in relation to fire, from insurance cover, potentially creates gaps in the design process. Gaps are already a source of concern, where design responsibility is not clearly defined. For example, the interface of the primary frame and the cladding is often not considered adequately, the main frame being under one designer and the cladding under a subcontract package. The situation is exacerbated by the enormous increases in premium and some businesses not being able to get cover at all.
Another reporter says that increasing premiums seem to be widespread. Quoting from the Temporary Works Forum Yearbook 2021/22,"consultants are seeing a worrying trend in the availability and affordability of professional indemnity (PI) insurance […] it may not be feasible to remain in business without significant increases in design fees. Will this drive consultants out of business?" . This reporter suggests anecdotally that one firm has decided to forgo insurance, which is concerning.
Furthermore, the findings of a recent pan-industry survey by the Construction Leadership Council pointed to widespread incidence of companies having to change the type of work they do because of restrictions on cover, with a quarter losing jobs because of tough conditions and limitations being placed on them by insurance firms. The survey results confirm that there is a widespread problem for many firms in being unable to obtain essential PI cover, which is having an impact on the ability of the industry to work, and undermining efforts to deliver remedial work to ensure building safety.
The survey results confirm that there is a widespread problem for many firms in being unable to obtain essential PI cover, which is having an impact on the ability of the industry to work, and undermining efforts to deliver remedial work to ensure building safety
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Feedback
To confirm this problem, I had to pay a significant increase in premium this year to the only underwriter prepared to offer temporary works design cover. In addition, the excess required for 'Basement Work' was raised to a level of around 40% of annual turnover. The insurer's definition of basement work is anything below ground level which is presumably meant to cover basement excavations or underpinning which are an increasing cause of failures. Unfortunately below ground covers shallow foundations, work inside completed basements, and potentially work on sloping sites with big differences in ground levels. It has resulted in me refusing any work in these situations, leaving the field open to less scrupulous and probably less experienced engineers to carry out the design. I have cover for this year but will almost certainly close my business towards the end of the insurance period.
I have recently renewed PI insurance and coincidentally at the same time was requested by an architect to confirm that my insurance covered me for basements. Having checked with the insurer what their definition of a basement was, it turned out that it is any part of a building either wholly or partially below ground. My projects are primarily small-scale domestic and I am not involved in the mega-basements that seem popular in London which would have a far greater risk involved. Having contacted various insurers, none were able to offer insurance for basements.
Surely, the insurers should be looking at the scale of projects and risk involved rather than imposing a blanket ban on basements.
I have just this month (August 21) renewed my PI insurance. I am a qualified Structural Engineer in semi-retirement, but now design domestic extensions and related work. My broker has had considerable difficulty finding an insurer and my premium has increased considerably, such that I have had to reduce my cover limit. I am also subject to limitations such as not working on projects with basements or swimming pools. I have also had to be specific about cladding types, such as tile hanging on two-storey extensions. Not a happy situation.
Expert Panel Comments
Expert Panels comment on the reports we receive. They use their experience to help you understand what can be learned from the reports. If you would like to know more, please visit the CROSS-UK Expert Panels page.
One Expert Panel Member suggests the consideration of the use of 'project-based' insurance to ensure that all organisations engaging on the project are adequately covered.
It is also recognised that this is a very current issue for many in the construction sector, typical of a hard insurance market.