Archive January 2012

Design and Construct Professionals………Attention to detail!!

31/01/2012 in Professional Indemnity Insurance

The widespread diversity of design and build jobs has led to building or engineering contractors becoming increasingly exposed to design liability, often because they have in-house design services or because they sub-contract out the design element of a project but still have contingent exposure. Clients will normally insist on Professional Indemnity cover these days. Indeed, with the advent of project partnering and new legal structures in construction projects, even contractors with little or no obvious involvement in the design will often be required to have Professional Indemnity cover.

Below are examples and typical scenarios where things could go wrong and lead to a building or engineering contractor being subject to a claim.

• The insured contractor was employed on a design and build basis to construct a hotel. The design works were sub-contracted. Clear design errors became apparent during construction leading to rectification costs and delays. The architect had ceased to trade. The architect’s PI policy failed to respond and the contractor was left holding the baby. Amount paid: £850,000.

• Following a catastrophic fire in a shopping complex with a number of contributory factors, the fire insurer issued claims against 13 parties, including the insured building contractor alleging that the faulty design of an extractor flue allowed hot gases to build up. Whilst the claim was successfully defended, irrecoverable costs of £80,000 were incurred.

• The insured was contracted to design and build a cold storage room in a food processing factory. After completion, the temperature of the room consistently remained too high because of inadequate design. Amount Paid: £250,000 plus costs.

• The insured designed and built a new car park building. Incorrect structural calculations contributed to total building failure. Amount Paid: £550,000 plus costs.

• The insured designed and installed the heating and ventilation for a restaurant. Post completion, air extraction and temperature control failed to work properly. The restaurant had to close pending repairs. Amount Paid: £150,000 plus costs.

• The insured contracted to design and install a bulk handling system at a quarry. The design of the handling system was sub-contracted to a specialist consultancy. Substantial damage was caused following catastrophic failure of the conveyor belt machinery. The contactor’s insurers brought a claim against the specialist designers but still incurred irrecoverable expenses of £62,000.

• The insured was contracted for the refurbishment of domestic flats to a previously agreed specification and was asked to fit some additional external balconies not included in the plans. The design of these balconies subsequently led to water penetration into the flats beneath. The builder’s design was found to be deficient. Amount Paid: £150,000.

For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms.

Flat Owners Insurance – 5 tips to get the best out of your insurance cover

30/01/2012 in Property Insurance

1)      Claims resulting from leaking water pipes are one of the most common causes of damage in blocks of flats. The cost of repairs to pipes is generally not covered unless the cause is accidental, however in order for the cost of tracing the leak to be covered, the policy must have a “trace & access insurance” extension.  It is important to check that this extension is in place and that the level of cover is adequate. It is not uncommon for trace in access claims in large blocks to exceed £15,000.

2)      It is recommended that the buildings sum insured is on a “Day One” basis. This is an inflation provision that provides protection against under-insurance in the event of a claim. The sum insured is inflated by between 15% & 50% to protect against increasing costs during the course of a repair or in worst case scenarios, a complete rebuild of the property.

3)      Insurance against terrorist acts is normally an extension of cover that can be purchased for an additional premium. Although the risk of a terrorist attack outside our major cities might be considered as minimal, if an event was to occur the parties involved in arranging the insurance cover could be held liable if inadequate cover is in place. Terrorism cover outside of major cities is relatively inexpensive.

 4)      It is important that the building sum insured is correct at the inception of the policy. We recommend that professional advice is taken to determine the right rebuilding cost. Further advice relating to rebuilding cost can be provided by surveyors Barrett Corp & Harrington.

 5)      We recommend that additional cover for loss adjuster’s fees is purchased. For a modest premium it is possible to cover the cost of such fees for material damage claims that exceed £5,000. Appointing a loss adjuster to act on your behalf will assist the claim process and ensure that repairs are completed as quickly as possible. Help is also provided with the sourcing of alternative accommodation if necessary.

For further advice about insurance for blocks of flats, contact Tony Gibbs on 01189 165 485 or complete one of our enquiry forms.

Recruitment Agencies……You know you need Vicarious Liability cover, but what else???

24/01/2012 in Professional Indemnity Insurance, Recruitment Industry Insurance

Recruitment agencies do face a unique set of circumstances when buying insurance. Yes normal office cover and general liability cover is required for their own staff, but they can often be responsible for the workers they place as well. They need a policy that offers explicit cover for vicarious liability, cover for standard and non-standard contracts, a specifically designed office package and a clear distinction between an agency’s own staff and the candidates they place.

Recruitment, staffing, and employment is a growing sector even in the current economic climate and the insurance industry has had to understand that this industry needs specialist coverage.

Below are examples of typical things that could go wrong for recruitment agencies:

Professional Indemnity claims:

Misrepresentation: The most obvious and common type of recruitment claim – where a recruitment agency is accused of not checking a candidate’s references correctly, or misrepresenting a candidate’s experience or qualifications to secure the deal. Frequently, end clients will claim for their re-recruitment costs plus any other expenses incurred. Less frequent are claims received from candidate’s regarding the suitability of the place of work, but claims have been received for sending CVs to current employers, and in one example, a recruitment agency unfortunately sent an email suggesting ‘this guy couldn’t get a job in McDonalds’ to the candidate, who just happened to be a lawyer, instead of their colleague.

Withheld fees: The second most frequent type of PI claim seen in the recruitment sector is hiring clients withholding their fees because of a dispute over performance, or if they deem the recruitment agency guilty of negligence. For recruitment agencies, cash flow is everything and if a large client withholds their fee, this can put the agency’s business in jeopardy. Whilst this is often used by end clients as a leverage tactic, when there are genuine grounds for a negligence claim, you want an insurer who will consider paying the withheld fees if the hiring client agrees in writing not to pursue litigation as this is a much faster resolution to the problem than months of defending a claim, and protects the cash flow.

Vicarious liability: This is a simple concept and means being responsible for the negligence of another party. Since recruitment agencies can be deemed the employer of temporary workers, they can also be deemed responsible for the temporary workers’ negligence, even when they have not been responsible themselves in supplying their recruitment service. Increasingly, recruitment agencies are signing up to hiring clients’ terms of business, and more agencies have contracts of employment with temporary workers than ever before, particularly as a consequence of the agency workers regulations which came into effect on 1st October 2011. This increases the likelihood of recruitment agencies being deemed the employer of the temporary workers, and as such, increases their exposure to vicarious liability. In one example, a recruitment agency supplied a construction project manager to a London local authority, who over the course of two years was accused of approving 17 false projects and defrauding the council out of a staggering £2.8m. The council argued they are not supervising nor employing the worker, and that the recruitment agency is responsible for the actions of the workers they supply and are suing the agency for their loss – the case is on-going.

Employers Liability claims:

To provide some context, the term ‘employee’ is not defined in statute, and the term ‘agency worker’ is not even mentioned. The employment status of temporary workers is therefore unclear in law and there have been no cases in court which have set a legal precedent. As such, all companies involved with the employment and placement of a temporary worker (including umbrella companies, 2nd tier agencies, master vendors, and the hiring client) can be deemed to be the joint or sole employer of that worker. In the event of injury or illness suffered by a temporary worker, all parties will be brought into the legal proceedings, and recruitment agencies therefore need to arrange employers’ liability cover with an insurer which is clearly including the temporary workers in their policy. Ordinarily, a recruitment agency will only have to pay defence costs, but with an increasing amount of non-standard contracts being used, agencies are more commonly found to have been at least partly negligent, since they do have a duty of care over all workers and this is especially the case with claims involving blue collar workers where injuries are usually more serious than in the white collar sectors.

Public Liability claims:

Since the employment status of temporary workers is unclear, a recruitment agency can also be found responsible for ‘third party’ bodily injury and property damage. A common type of recruitment agency public liability claim involves medical or care workers transporting patients from a chair to a bed for example. If the patient is injured because they were not lifted properly, or only one carer was assisting when two are required, the patient can make a public liability claim against the agency. Another common claim in this sector involves administering the incorrect quantities of medicine.

Drivers Negligence:

Drivers negligence is designed to cover damage to end clients’ vehicles when the driver they have supplied has been at fault. Typically this is cover is only available for agencies supplying ‘professional drivers’ with LGV licences and above. Most common claims are:
1) Drivers being unfamiliar with how the lifting mechanism of the trailer operates, often overloading them, and damaging the lorry
2) Drivers opening doors into bollards, reversing into objects, crashing whilst parking
3) Drivers often fail to check or are unfamiliar with the dimensions of the vehicle, and an incredibly common claim is for drivers crashing lorries into bridges!

Cyber & Privacy Liability:

Recruitment is a massive ‘data’ business and by the nature of their industry they’re holding and processing an awful lot of confidential data – CVs, salary details, bank details etc. They’re also conducting a fantastic amount of business online and through social media sites, so with such a bank of confidential data, and so much of it used online, it’s essential to have full cyber and privacy coverage just in case there is a security breach, virus or hacking attack and the hiring client suffers a financial loss as a result.

For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

User Generated Content, Libel, Slander and intellectual property rights……just some of the reasons why Media companies need Professional Indemnity Insurance!

19/01/2012 in Business, Professional Indemnity Insurance

The media industry has developed exponentially in recent years. Along with the IT industry, media risks used to be treated as “Miscellaneous” but, as the marketing and communications industry has developed worldwide, including the introduction of social media, the understanding of the insurance market has had to improve so that media businesses can be adequately protected. At Macbeth Chartered Insurance Brokers, we treat media as a class of its own. We offer media businesses the confidence that when we provide them with a policy it is designed for their industry:

Below are examples of typical things that could go wrong for Media Professionals.

•The insured was involved in a marketing strategy for a TV manufacturer. The product was marketed with a name that was subsequently found to have been used by another electronics company. A claim for breach of copyright was made and the strategy had to be withdrawn. Amount Paid: £150,000.

•The Insured carried out a direct mailing in connection with a new product launch. A large number of addresses proved to be incorrect requiring a complete re-mail. Amount paid: £500,000

•An advertisement broadcast on television contained the wrong soundtrack. Amount paid: £120,000

•Failure of marketing campaign due to the misinterpretation of the initial information provided by the client to the marketing agents. Amount paid £250,000

•The Insured created a web site for a client but used unauthorised images leading to a complex overseas copyright claim. Amount paid: £25,000

For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

Macbeth adds new head to private clients team

18/01/2012 in Press Room

Jeremy Edwards has been appointed to the new position of Head of Private Clients at Macbeth Chartered Insurance Brokers in Reading and takes responsibility for the firm’s specialist division looking after the insurance needs of high net worth individuals.

A key aspect of the role will be to develop Macbeth’s offer in this niche market and strengthen the firm’s position as a leading broker of private client business, both in the high value homes and motor insurance sector as well as in fine art and antiques, jewellery and watches.

“Jeremy brings over 20 years’ private client management experience, all of it at senior management level,” said Managing Director Paul Macbeth. “We’ve specialised in this area for a number of years and with Jeremy leading the team I’m confident we can become the largest private client broker in the Thames Valley.

“His appointment reflects our ambitions in this market in readiness for our pending office move to new, bigger premises in Theale.”

Jeremy joins Macbeth from Bluefin where he was Head of VIP Client Services for the Private Clients Division. His responsibilities included the development of new business, supplier relationships, branded products and staff development. Jeremy also recently attained an accreditation to be a member of the Institute of Leadership and Management.

His insurance career began in 1980 at Guardian Royal Exchange and also includes senior management roles with Worrell Fry & Co, Stackhouse Poland and Stuart Alexander Ltd.

For further information:

Paul Macbeth ACII

Managing Director

Macbeth Chartered Insurance Brokers

0118 945 2944

07976 815069

-end-

Note to editors:

Established in 1992, Macbeth is a privately owned, boutique insurance broker, one of an elite band with chartered status. It specialises in bespoke solutions for both commercial organisations and wealthy individuals in the Thames Valley, London and internationally. The firm combines absolute professionalism with a well-honed service ethic to provide clients with a highly responsive and informed approach to their insurance requirements. The management team is led by Paul Macbeth, son of Malcolm Macbeth who founded the business.

Commercial Property Insurance – Tips to avoid under-insurance

16/01/2012 in Property Insurance

Barrett Corp & Harrington (BCH) has kindly supplied us with some useful tips with regards to avoiding under-insurance. BCH specialise in insurance reinstatement cost assessments and risk surveys.

Under-insurance can lead to reduced claim settlements which can impact massively, in respect of future profitability and in worst case scenarios the continuation of a business. When the building is owned by a pension fund, maintaining an adequate sum insured is equally important.  

The building sum insured has been based on market value

The market value is the market value.  There is absolutely no correlation between the market value and the building sum insured; never has been and never will be!   The two are often significantly different and either one can be far higher or lower than the other depending on the location and quality of the building.

The value has been based on a developers’ costs

Developers keep costs to a minimum by using their own team of consultants and contractors.  By constructing en mass, savings are achieved that would not be available in an insurance claims scenario.  We also have to take into account the additional costs of demolitions and fees.

The building is in a funny location

Not funny ha ha. We mean there’s something a bit unusual about where it is. Like in a city centre adjacent to a railway line, or on a small island that’s only accessible via a weight restricted bridge. Imagine how these factors could complicate a rebuild. Complication equals cost. Cost means higher sums insured.

The building has recently been altered

Extended, altered, refurbished. What about the sums insured?  Did they get altered at the same time?

To take the guess work out of setting your building sums insured, please contact Barrett Corp & Harrington on 0844 412 4495 or visit www.bch.uk.com

For advice on commercial property insurance contact Tony Gibbs on 01189 165 485 or complete one of our enquiry forms

Architects………….And Compulsory Insurance!

16/01/2012 in Professional Indemnity Insurance

Professional Indemnity insurance became compulsory for all Architects in 1997 under the ARB Architects Code. The ARB recommended minimum limit of liability for a PI policy is £250,000 each & every claim; the ARB also recommends that, upon cessation of business, architects ensure they have a minimum of six years’ run-off cover.

In the UK, architecture is regulated by the Architects Registration Board (ARB). Under Section 20 of the Architects Act 1997 the title ‘architect’ is protected and can only be used by a person who has had the education, training and experience needed to become an architect, and who is registered with the ARB. An architect must be a member of the Royal Institute of British Architects (RIBA) to become chartered.

Below are examples of typical things that could go wrong for an Architect:

•  The insured signed a certificate of practical completion on a residential new-build project. Many snagging issues arose which went unresolved by the appointed contractors, who blamed design faults. Amount paid: £450,000

•  A claim was made alleging faulty design of a building causing water infiltration and foundation issues. Amount paid: £2,500,000

•  Problems in the construction of a new house caused delays and extras, leading to a claim against the insured, who had involvement in planning, design and site inspection. Amount paid  £65,000

•  The insured’s client had financial problems and became the “client from hell”, changing specifications, sacking contractors and taking fanciful claims all the way to court against anyone involved. Successfully defended but hundreds of thousands of pounds of legal costs incurred that could not be recovered.

•  Warehouse floor disintegrated after only a few months of use. A claim was made against the architect alleging deficiencies in the design. Amount paid: £110,000

For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

Safe ratings – How insurers assess what type of safe is suitable

11/01/2012 in High Value Homes, Jewellery and Watches

The price of gold, diamonds and precious metals has risen dramatically over the last two to three years; general estimates suggest as much as 50-60%. As a result, the cost of jewellery has also risen by similar percentages. Sadly this is only highlighted to people when a loss occurs. Insurers will require either an estimate to repair or replace the item lost or damaged or use one of their recommended companies. It is then that realisation hits that the cost of replacing the treasured item has doubled and the sum insured is not sufficient.

The first recommendation is to have the jewellery valued every two to three years. At Macbeths, we have access to a number of reputable companies that can provide up to date valuations at a reasonable cost. This will ensure that there is no under insurance and that clients will be fully reimbursed following a loss.

In addition to the under insurance aspect, an increase in values can also create significant changes to household insurance’s, not only in premiums but also in any terms applied. Many insurers are asking for the installation of floor safes, the size of safe requested is all based on the total jewellery value within household. Historically ‘Cash Rating’ is the term used for safes that are strong enough to be able to hold cash, but in terms of jewellery the ratio is 10 to 1, so for example £80,000 of jewellery would see an insurer requesting a £8,000 cash rated safe to be fitted.

The second recommendation is to install a floor safe, anchored, of sufficient cash rating that it can protect your jewellery. It is also prudent to plan ahead so that if your jewellery collection is likely to increase over a number of years, install higher cash rated safes to be able to cater for the higher amount.

If your insurer asks you to install a Euro grade safe, what does this mean in terms of cash rating?

Below is a list of the cash rated safes and what they would become in Grades under the European grading system:

Grade 0 – £6,000 cash rating

Grade 1 – £10,000 cash rating

Grade 2 – £17,500 cash rating

Grade 3 – £35,000 cash rating

Grade 4 – £60,000 cash rating

Grade 5 – £100,000 cash rating

Grade 6 – £150,000 cash rating

For further information about safes and the insurance implications as well as how to insure jewelley, please contact Carl Sharp on 01189 165487 or complete one of our enquiry forms.

Professional Indemnity Insurance for IT companies…..And the need for specialist cover!

10/01/2012 in Professional Indemnity Insurance

Information technology is the backbone of many businesses yet is poorly understood by many. There is often an enormous mismatch between client and professional expectation, probably unique to the IT industry as regards professional indemnity claims. Moreover, the IT industry ranges across an extremely wide variety of services, from out-sourcing through bespoke software, hardware sales, configuration and installation to recruitment and internet services. IT risks used to be treated as “Miscellaneous” but, as the industry has emerged into one of worldwide importance, so the understanding of the legal profession (and thus insurers) has led to a specific focus on IT in its own right.

At Macbeth Insurance Brokers we provide the level of cover that specifically addresses the issues encountered by IT professionals.

Below are some genuine examples of typical things that could go wrong for an IT Professional

•             The insured designed a customer management software package. It was alleged that the software failed to comply with the agreed functionality. Amount paid: £350,000

•             The insured configured an off-the-shelf software package for use by the client, and sold and installed associated hardware. There were serious difficulties following installation, leading to the client refusing to pay the balance outstanding and threatening a claim. Insurers paid the outstanding balance to the insured, avoiding the expense and reputational damage of a legal case. Amount paid: £55,000

•             It was alleged that there were substantial deficiencies in the design of a software package, resulting in the system failing to meet the client’s requirements. Amount paid: £450,000.

 For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

What is Professional Indemnity Insurance?

06/01/2012 in Professional Indemnity Insurance

Professional indemnity insurance is liability insurance that covers your business in the event that a third party claims to have suffered a loss as a result of professional negligence.

Many professions are required to have PI insurance cover as a regulatory requirement or as part of their professional authorisation. This includes solicitors, accountants, architects, insurance brokers and financial advisers. Many consultants, technology companies, media companies, designers and other emerging professions also choose to or are contractually required to have this type of insurance.

Making sure you are properly covered is an important aspect when considering PI insurance. As an example PI cover is usually on a claims-made basis. This means that the policy will only cover claims that are made while the policy is live. So ensuring you have the correct retroactive cover in place to give you peace of mind.

For help and advice about Professional Indemnity insurance please contact Scott Sayce on 01189165483 or complete one of our enquiry forms.