Many contracting businesses who do not specifically design anything for a fee will be unaware of the potential risks they may face in not carrying Professional Indemnity cover. In the increasingly litigious society we live in, where it would seem that everyone wants someone to blame, should you consider cover just to protect yourself if something goes wrong? Often contracts will stipulate that Professional Indemnity cover is required. Professional Indemnity Insurance reacts in circumstances where a client claims to have suffered a financial loss as a result of a professional error made or alleged to have been made.
Even if you have made no error, a policy would provide cover for legal fees to defend yourself.
Contractors may incur design exposures even when they have no contractual liability for design. For example, they may have to make changes as the construction progresses following problems encountered on site.
Contractors have a huge amount of practical experience but are not design professionals and it is often when this practical knowledge, combined with professional expectations, that things can go wrong. Professional designers are not unknown to design something that cannot actually be built and the contractors input may achieve everything intended. However, if it does go wrong, everyone will be pulled into the claim and if the contractor does not carry their own Professional Indemnity cover this can become extremely expensive.
Professional Indemnity cover is arranged on what is known as a ‘claims made basis’ rather than the traditional ‘claims occurring’ which would apply to Employers or Public Liability incidents. This means the insurer on cover at the time an allegation is made would be responsible for the claim rather than the one on cover when the error occurred. It is therefore very important to review your policy carefully at each renewal, particularly if there is likely to be a change of insurer, to avoid any difficulties should an allegation be made after renewal. This also means that cover needs to be purchased for a further period after completion of the work to ensure full protection continues.
For those individuals, particularly one-man operations or very small businesses, they may not recognise that they have this threat, because it hasn’t yet happened to them. But it only takes one complex issue to take up all the management time for a small SME – which typically doesn’t have sophisticated resources, or a legal and compliance department like large companies have – and that can really threaten the business.
Contact us today to discuss Contractors Professional Indemnity cover and how it can benefit you.