Why do contractors need PI insurance?

Date: 13th June 2018

As a broker we have been asked why Contractors need to purchase Professional Indemnity Insurance.  They don’t really understand how it might affect their contracting clients or what levels of cover they need.  So, we thought we’d let you have some details of where their Public Liability Insurance would not cover claims that have occurred to help you explain the potential gaps in your cover.

Contractors Professional Indemnity Losses

Below are some real life examples from our insurers where claims have occurred that will not be covered under a standard Public Liability policy.  This list proves that Contractors need Professional Indemnity insurance to ensure they are adequately covered.

HVAC Engineers

The contractor designed and installed a heating system but following the work the client alleged negligence in the design of a heating and ventilation system.  This was not covered under their Public Liability policy so their PI insurer paid £1,500,000.

Electrical Engineers

The insured designed and supervised the installation of the mechanical and electrical services in an office block.  Operational difficulties became apparent with the air-conditioning, allegedly due to a design fault.  This wasn’t covered so their PI insurer paid £150,000.

Mechanical Engineers

Having designed and installed a furnace for their client, they reviewed the output of the system and decided that the Contractors was negligent.  The PI insurer paid £255,000.

Electrical Engineers

In another occasion, there was a contractor who designed the electrical services for a factory unit.  The client alleged that the lighting was inadequate and did not comply with relevant regulations.  Again this was not covered under their Public Liability insurer so the amount claimed from the client £125,000.

Roofer

The roofer undertook the replacement of a roof of a car park that was designed by the insured.  The roof started to leak and the client alleged negligence.  The amount paid for this claim was £225,000.

Mechanical Engineers

The design of a machine proved inadequate to cope with the weight of items being produced which led to a failure of the system.  £15,000 was paid to correct the machines load capacity.

Civil Engineers

The client alleged that the design of a water scheme did not meet the performance requirements and was found negligent.  The amount paid to correct this was £2,250,000.

Structural Engineer

A claim was brought alleging negligence in a redevelopment project.  The amount paid as a result of the claims was £550,000.

Builder

Following the completion of a new build it was alleged that parts of an office block were of faulty design.  This was upheld in court and the amount paid was £6,000,000.

So please don’t think PI is only for pen pushers!

As a result of claims like these, we are increasingly seeing main contractors and councils request that all Contractors carry PI insurance.  How many of your clients need this cover?  Simply ask – Do you ever design or change a design when on site?  It might be worth reviewing before your own PI gets a claim!

Simply contact us if you need to arrange Professional Indemnity cover.