Insured for Design?

Professional Indemnity insurance for the design and construction industry provides cover for claims made against the Insured for wrongful acts relating to professional activities or duties in connection with the services provided.

Designers - Definition

Any person in the course of their business who prepares, modifies or arranges for someone else to design a construction project, including the temporary works is classified as a ‘designer’.

Source – Construction (Design and Management) Regulations 2015

What is a design?

It’s a wider definition than you would think and could include drawings, sketches, specifications, bills of quantity or calculations for the purpose of constructing, modifying a building or structure, product or system. Many contractors often do not think of themselves as designers. However, in the course of your work if you are for example, installing a heating or ventilation system and specify the type of system to be used then you can be classed as a designer. Contractors who select a product are designers and must not only take account of the health and safety risks, product and potential installation risks but also the design risks incurred. Most contractors carry a design risk, even if they are unaware of it and consequently most contractors will require Professional Indemnity insurance.

Am I insured, what do I need?

Many larger contractors purchase Professional Indemnity insurance because they are required to go through contract conditions rather than because they believe they actually require the insurance cover. In broad terms Professional Indemnity insurance for the design and construction industry provides cover for claims made against the Insured for wrongful acts relating to professional activities or duties in connection with the services provided.

Various limits of indemnity can be selected by the Insured and are usually driven around the typical size of contract that you may work on. For example where you work on contracts with a typical limit of £1M then usually a Professional Indemnity limit of £1M will suffice. However, many clients insure for higher levels and £5M or £10M limits are often required. It is also not uncommon for your customer to require you to carry high limits of cover even if the contract limit is relatively low.

Claims examples

  • The insured was engaged as the main contractor on a design and build basis to refurbish a hotel. The design works were subcontracted. Design errors became apparent during construction leading to rectification costs and delays. The architect had ceased to trade and costs were not recoverable. The main contractor’s policy responded.

  • Following a fire in a retail unit, the building insurer issued claims against various parties including the building contractor, alleging that the faulty design of an extractor flue allowed hot gases to build up. Whilst the claim was successfully defended, substantial and irrecoverable costs were incurred.

  • The insured was contracted for the refurbishment of offices to an agreed specification and was asked to fit some additional waste drainage not included in the plans. The design of the system subsequently led to water penetration into the flats beneath. The contractor’s design was found to be deficient. The policy responded.

Advice – who should I talk to?

If you would like to discuss your insurance requirements with regards Professional Indemnity or any other business insurance risk, please contact Darwin Clayton (UK) Ltd.

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For other useful information and links please visit our website at www.darwinclayton.co.uk

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