Design and build contractors…….Do you have a “design flaw” in your insurance portfolio???

Historically, contractors have avoided Professional Indemnity insurance by persuading clients that they have no design liability and that design professionals e.g. architects, engineers and other such professionals will have such cover and that would be sufficient. In recent years though, contractors are increasingly taking on a design liability, either by employing their own in- house professionals or by assuming a liability where they sub contract out the design element.

“The Design Build method now accounts for 75% of all building projects in the UK and offers the client a ‘one stop shop’ for his building.“

The type of work undertaken will of course be a key concern for Insurers and it is worth looking at in a little more detail:

• Full blown design and build – this is where the contractor does everything using its own employees i.e. all the design work, the supervision of construction and the building work. The professional exposures are the same as a consultant within the construction industry.

• Contingent design and build – This is where the contractor takes on the contractual responsibility for the design but sub contracts out such work to others. The design work would be carried out by firms of architects and engineers who should carry their own professional indemnity. In view of the fact that insurers should be able to recover payments from those professionals who have carried out the negligent work, (any payments made emanating from their negligence) this is regarded as lower risk. It is vital here that the contractor ensures that any consultants it employs carry, and continue to carry, PI insurance.

• Pure contracting – This is where the contractor purely builds from the designs and under the supervision of other professionals who have been appointed directly by the client. This is considered by insurers as low risk work but is not without its dangers.

• Fees – Sometimes a contractor earns fees (as opposed to turnover which is the correct description for the three categories above). They may be a project manager for other contractors or carry out other professional functions such as design or quantity surveying. These activities would normally be rated the same as a professional firm carrying them out.

For help and advice about Professional Indemnity insurance please contact Ben Butler on 0118 9165481 , or complete one of our enquiry forms

Author: Scott | February 29th, 2012

Contact the author

Leave a Reply




*



Macbeth is a leading independent chartered insurance broker specialising in bespoke cover for both businesses and high net worth private clients.

Get in touch

  • Reading: 0118 916 5480
  • London: 0207 036 8767

info@macbeths.co.uk


Twitter Facebook

© 2014 Macbeth | Design: Greenfisher | Terms | Privacy | Cookies

Macbeth Insurance Brokers is a trading name of M S Macbeth Ltd, which is authorised and regulated by the Financial Conduct Authority, and registered in England and Wales No: 03408293.
Registered office: East House, 109 South Worple Way, London, SW14 8TN.