Those who work in the building and engineering sector are becoming increasingly exposed to design liability.
To mitigate the exposure that in-house or subcontracted design services bring with them, it is advisable to take out design and construct insurance. Here, we look at the different types of professional indemnity insurance for designers, consultants and subcontractors involved in all aspects of designing and constructing a project.
WHAT IS DESIGN AND CONSTRUCT INSURANCE?
Introduced in the late 1990s, design and construct insurance has become more prevalent recently as many clients insist that those involved in a contract have their own professional indemnity. Professional indemnity insurance offers those in the construction industry specialised coverage for design errors or omissions for:
• Engineering such as mechanical, electrical, heating, ventilation and air conditioning
• Construction design management
• Cover for contractors even if not directly involved in design
• Cover for quantity surveyors
• Mistakes with products, machinery or designs
• Any problems with the physical construction
HOW TO STAY COVERED WHEN RISK TRANSFER IS NOT ENOUGH
Many of those who are starting out on a design-build will do so with the intention of subcontracting out the design of the project. However, just because you’re subcontracting out the work doesn’t mean you have eliminated the risk.
This misconception is frequently made by contractors and their agents. The design-build contractor bears a significant degree of risk even when all the correct risk transfer provisions (indemnity agreements, waivers of subrogation, and insurance requirements) have been covered.
The rule of thumb is don’t rely solely on hold harmless or other contract provisions to protect you from design liability because:
• The hold harmless provision may actually be unenforceable
• The design firm may not be in business by the time the claim is filed
• Architects and engineers’ errors and omissions insurance typically does not cover contractual liability
In summary, if you are involved in any phase of the design-build, you should purchase your own professional indemnity insurance.
TAILORED INSURANCE OPTIONS
Design and construct insurance was created solely to cover your industry. As such, there is great flexibility in coverage and even better knowledge of the exact needs within the sector. Depending on your precise role in the design-build, design and construct insurance is customisable to your exact needs.
What’s more, there is a wide range of indemnity limits out there, as well as various excess options to suit every budget. Standard cover typically includes libel, slander, and dishonesty; you can talk to OBF about all aspects of professional indemnity to make sure you are covered in the event of any situation for which you may be liable.
Remember, while you should never sell yourself short when it comes to insurance of any kind, it is possible to reduce your professional indemnity insurance premium by actually selecting a higher policy excess (the amount you agree to pay in the event of a claim on your professional indemnity insurance policy).
FIVE THINGS TO REMEMBER ABOUT DESIGN AND CONSTRUCT INSURANCE
#1 Check the design completely to ensure it works, as failure to do so could lead to problems. Time and money spent up front is time and money (and potential litigation) saved later on.
#2 Remember, even if a contractor has no design or professional supervisory responsibility, they may have a duty of care to the client if they become aware of a design defect at any stage.
#3 Before you begin any project, take out design and construct insurance. It is a unique professional indemnity insurance for any designer, consultant and subcontractor involved in any aspect of designing and constructing a project.
#4 Take responsibility for understanding the risks you, your subcontractors, and your clients face when undertaking a design-build. Always ensure every member of the team are aware of and understand their role, and any potential need for additional coverage.
#5 You can reduce your professional indemnity insurance premium by selecting a higher policy excess (the amount you agree to pay in the event of a claim on your professional indemnity insurance policy).
PROJECT YOURSELF FURTHER WITH DESIGN & CONSTRUCT INSURANCE
Design and construct insurance can help you maintain peace of mind and mitigate some of the risks before helping your clients. Still unsure about the best solution to fit your needs?
Our OBF underwriters have the expertise and experience to ensure you choose a plan that’s best for you. Whether you’re looking for the right financial protection, someone to be on your side, or someone to give you the best possible advice, the OBF team are here to assist. So don’t delay, contact us on +353 (1) 660 1033 today.
