MPR offers Professional Indemnity (PI) insurance to architects and engineers to protect against damages and defence costs arising from their professional services.
The PI insurance policy addresses the spectrum of risks and dangers that architects and engineers face when carrying out their business activities. It provides comprehensive cover, incorporating design developments to accommodate many of the newly emerging litigation trends and themes, to meet the needs of organisations that provide architectural and engineering services.
Why do your clients need PI insurance?
- PI cover is compulsory for all members of the Royal Institute of British Architects (RIBA), and many professional engineering bodies emphasise the importance of maintaining PI insurance.
- Regardless of compulsory requirements, all professional service firms owe a duty of care to third parties. This, coupled with an increased awareness of legal rights and remedies, means that protecting the assets and reputation of an organisation is very important.
- Even the most experienced and respected firms are not immune from making mistakes and protection is required from third party claims alleging negligence, and other legal liabilities.
- Architects and engineers may also find themselves embroiled in a claim even when they may have done nothing wrong, particularly on contracts with multiple parties. Disputes can quickly intensify, leading to escalating defence and settlement costs.
- Protection is in the interests of both the professional firm and their clients. Evidencing a good quality insurance product is important and may even be a marketing advantage when competing for contracts.
What does the policy cover?
- The purpose is to insure an organisation for defence costs and legal liability arising out of their business activities including, but not limited to, liability for:
- breach of professional duty;
- any form of defamation;
- intellectual property infringement.
- Also, to insure them for costs incurred in:
- investigations of them by regulators and other authorities;
- defending a criminal proceeding;
- ombudsman awards;
- replacing or restoring documents.
- The policy will also provide mitigation costs, which are designed to rectify any wrongful acts before they result in a claim against an organisation.
What limits are available?
Up to £10 million for any one claim.
What does an underwriter like to see?
- Financially sound organisations with good qualifications and experience.
- Tried and tested methods and procedures within their business activities.
- Established businesses that have been operating for more than three years.
- Total contract values comparable to the size of the organisation
- Limited use of sub-contractors.
- UK or European based organisations.
Is there anything an underwriter wouldn’t insure?
- Some architectural and engineering activity is exposed to more risk. Underwriters exercise a more cautious approach to activities in higher risk industry sectors (industrial, oil and gas, infrastructure).
- Underwriters are also more cautious of businesses with civil/structural work, surveying activities or those with a higher exposure to third party bodily injury or property damage.
- Innovative technology or design is not often tried and tested, so underwriters may want to understand processes in greater detail.
Why choose MPR?
- Deep experience over many years in all the products we underwrite
- Simple and clearly stated policy language with the removal of ambiguity
- A straightforward, broker focussed, technical and service based proposition
- Strong financial rating
- Deductible not applicable to defence costs
- Architects and engineers can become entangled in problems on contracts, particularly where there are multiple parties involved. Allegations will need to be defended, and having access to claims and legal experts is important. This allows the business to continue as usual, with the peace of mind of knowing that they won’t be out of pocket unless, and until, there is a settlement.
- Ombudsman awards
- When complaints occur, organisations can also be examined by an ombudsman with the power to issue compensatory awards. The insured organisation has the protection for any awards or additional costs made by any ombudsman (provided it comes from a claim arising out of their business activity).
- No insolvency exclusion
- An insolvency exclusion is a feature in some policy forms. If an insured organisation enters a bankruptcy or insolvency proceeding, the PI cover will continue until the end of the policy period (for wrongful acts occurring before the insolvency).
- Collateral warranty cover
- Common in the construction world, collateral warranties carry obligations to additional third parties (beyond the original client), ensuring duties have been fulfilled to professional standards. It is important the insurer recognises these are not to be treated in the same way as other contractual terms and also does not limit the amount of times they can be assigned.
- Mitigation costs
- Quite often, a speedy response and sensible resolution can prevent a problem from escalating into a costly claim. Having mitigation costs (including fee dispute settlement) allows the insurer to work quickly in a time of need to ensure that the situation is rectified with minimal damage.
- No cyber exclusions in the policy
- Particularly relevant to the construction industry with the increasing use of Business Information Modelling (BIM). BIM uses a single system of computer models for all parties and is intended to offer savings in cost and time, as well as greater accuracy in estimation, and reduction of errors, alterations and rework. Cyber exclusions can create ambiguity should a PI claim arise.
- Free trouble-shooting legal advice
- The policy provides direct access to an award-winning law-firm (specialising in PI Insurance) for 60 minutes of free consultation on each separate PI related matter. It doesn’t have to be a potential claim, it could just be a situation that needs some assistance. This access to partner level advice doesn’t constitute notification to the insurer, so the policyholder will have peace of mind that it will not be regarded as a claim or circumstance.
- Previous policy cover option
- Moving PI insurance carrier is a lot easier than it used to be. Whilst there has never been any obvious impediment to switching to a stronger product offering, bewildering use of jargon and statements of product capability can nonetheless create some room for doubt. Allowing an optional ‘look back’ provision in a policy permits a previous policy to be used to interpret a claim made on a superseding form. It is a far from perfect science, but it can provide some comfort where it is required.
A well-established architect was engaged to refurbish a high-end retail store. With the clients input, the architect decided on a timber flooring, which was laid by specialist contractors. Six months later, during an unusually hot summer, the flooring started to warp causing customers to trip. It was deemed unsafe and the only option was to replace the entire floor.
The retailer brought a claim against the architect for financial loss due to the closure of the department and the injury of a customer. It was actually the specialist contractor that made the mistake (as they hadn’t allowed for expansion) but they carried out the work on the architect’s behalf, so they were covered by the policy. The settlement figure was more than six-figures for the floor and £5,000 for a bodily injury claim.
An architect designed a new house for a wealthy client, who were pleased with the design. However, during the construction phase, problems occurred with the builder, creating a delay and incurring extra costs.
The problem here was not with a house design error, but with the additional project management services that the architect took on. They had failed to carry out thorough site inspections and hadn’t identified that the builder had been covering up a problem. The client was unhappy with the additional costs and threatened to bring a substantial claim. The issue was resolved quickly, utilising the mitigation costs provided by the policy to keep the project on track and prevent the larger claim. Although the amount paid was only £25,000, it saved a potentially much larger possible amount, as well as valuable time.
A heating and ventilation engineer was engaged on a hotel refurbishment project to calculate the air conditioning system requirements. Unfortunately, the calculations were wrong, so the changes that were consequently made were inadequate. The hotel had to purchase additional air conditioning equipment in the short-term and then the services had to be re-performed.
This is an example of a simple mistake that can happen to anyone. As a result of the mistake, the hotel had to close for a week while the extra units were installed. A claim was made for monetary compensation, consisting of lost booking revenues, additional equipment for the short-term solution and for reputational damage. The overall settlement and costs amounted to over £250,000.