Is Professional Indemnity Insurance necessary for Builders?

Share
Tweet
Share

Professional indemnity insurance is similar to public liability insurance cover in the sense that it covers compensation claims made against you.

The compensation claims that a public liability insurance policy covers are compensation claims arising from things that you have done or failed to do. If you dropped something from scaffolding and it injured someone below or damaged their property, any compensation claim arising from that would be covered. Similarly, if you failed to warn members of the public of a hazard and they were injured as a result, any resultant compensation claim would be covered.

However, although public liability insurance covers claims arising out of negligence, it doesn’t cover claims arising out of professional negligence. This means that in certain situations, you would be uninsured if you didn’t have professional indemnity insurance.

What is professional negligence?

Professional negligence differs from standard negligence because it involves errors and omissions in the designs and specifications that you provide. But in the same way that standard negligence can lead to substantial levels of compensation awards, professional negligence can also lead to substantial compensation awards.

If an error or omission in one of your designs or specifications leads to a compensation claim for a serious injury, the compensation claim could easily result in a compensation award of more than £250,000. The final claim settlement figure would be higher, because it would also include any associated costs and expenses such as the claimant’s loss of earnings, as well as the legal fees that were incurred to settle the claim.

So, do I need professional indemnity insurance?

The exclusion of professional negligence in a standard public liability insurance policy only applies to professional activities that were done for a fee or where a fee would normally have been charged. It doesn’t apply where the professional activity was part and parcel of a wider contract.

As an example, if you are asked to build a wall and as part of that project you are required to design the wall in question, any compensation claim arising from a fault in the wall’s design would be covered by public liability insurance because you hadn’t charged a separate fee for the design element of the contract. You would not need professional indemnity insurance for this sort of work.

However, if you are asked to design a wall for someone else to build, any compensation claim arising out of a fault in the design would not be covered by standard public liability insurance because there was a specific fee for the design work. You would need professional indemnity insurance to protect you against any compensation claims that might arise.

You would also need professional indemnity insurance if you provide quotes that include full designs and specifications even if you provide those quotes for free. Even though no fee is involved, the design in the quote is separate from the building work and the client is under no obligation to use you for the building work.

Premiums you won't find on a comparison site

Starting at £59* per year
Get a Quote

Dealing with professional negligence compensation claims

Professional negligence is a complex area of the law and dealing with compensation claims that allege professional negligence is not easy.

Other than the obvious advantage of the fact that professional indemnity insurance will pay any compensation awarded against you, one other advantage of this type of insurance is the fact that your insurer will have a fully-trained team that specialises in this type of claim that will be able to handle the claim on your behalf.

Contractual requirements

Unlike employer’s liability insurance which protects you if one of your employees claims compensation from you, professional indemnity insurance is not required by law.

However, your main contractor may make it a contractual condition that you have this type of insurance. Without it, you may not be allowed on site, and your opportunities to work could be restricted.

You may also need professional indemnity insurance because some professional organisations insist that you have it as a condition of your membership.

Related Articles:

Our Reviews

4.9 / 5 Based on 1162 Reviews
Read all reviews »
*This indicative price is for £1m public and products liability, £250,000 legal expenses, £10,000 financial loss and £10,000 accidental death insurance cover for a sole trader. The price includes insurance premium tax and our admin charge. 22% of new customers paid less than £59 between 1st January 2019 and 31st August 2019. The actual price you pay will depend upon your specific business requirements and will be affected by your trade, your claims history and the optional covers you select which are all priced separately during the quote process. This website is intended for customers based in the UK and is therefore subject to the UK regulatory regime(s) © Copyright 2019 Tradesman Saver | Tradesman Saver and Henry Seymour & Co. are trading names of Barkdene Limited which is authorised and regulated by the Financial Conduct Authority (FRN 303965) for our insurance distribution and credit broking activities. Barkdene Limited is a credit broker not a lender. You can check this on the Financial Services register https://register.fca.org.uk/.
Registered in England No 1842617. Registered Office – Chancery House, St Nicholas Way, Sutton, Surrey, SM1 1JB. All rights reserved.
Get a Quote