The P & M Group

Professional indemnity insurance for fire safety – is your business unknowingly at risk? ISD Solutions Managing Director, Adrian Smith, offers you some insight.

Claims on professional indemnity (PI) – the policy taken out to protect against the risk of negligent business services or advice – are seldom straight forward.

More often than not when things do go wrong there is a variety of contribution factors. So it’s a complex matter and we have worked with our insurance brokers to compile a check list of what to do, and what to avoid.

Be on solid ground

When a claim is made the first step for the insurer is to check whether the policy cover will engage. This will include a full review of the information submitted when the policy was taken out.

Be warned that any discrepancy between the submitted information and reality could mean the policy doesn’t operate. This is not a great place to be. If your policy does not respond you will still be liable for the claim.

It’s logical to expect that a claim as a result of a professional error or omission can involve very significant costs.

There can be several heads of claim: rectification costs, consequential losses and of course legal costs.

Even if you don’t have any cover, you will still be liable if the error is yours and if the claim is valid.

So take care when filling out the application. We all frequently complete insurance questionnaires that request cover limits, but how often does a questionnaire seek to establish the full extent of the cover and applicable exclusions? Likewise, how often does a completed form fail to elicit the true position ?

A note on subcontractors

Sub-contractors in particular often question why they need PI cover at all, given they don’t believe their activities involve any design aspects.

However while the complexity may not be there, even a simple selection of materials may be considered part of the design process. So, put simply, if a sub-contractor has any design input you should ensure they carry PI insurance. If they don’t, the buck stops with you.

Do your (fire specific) due diligence

It is extremely important that you review your potential service provider’s PI insurance policy details to establish what is and what is not included.

With regard to fire protection activities specifically, the following four considerations may help:

1.     What is the scope of the work services insured? The policy description may refer to general aspects of composite panel building but does it refer specifically to fire protecting walls and fire stopping structures and services?

     It is critical that a business description on a policy is up to date and accurately reflects the full extent of work undertaken. This is frequently not the case. Informing insurers of a new activity is often overlooked.

2.     Does the policy restrict who can carry out design? For example, all policies will require a designer to have relevant qualifications or a minimum number of years’ experience. In the context of this article, please bear that this would need to be a relevant qualification or experience relating to fire protection.

You may rest assured that this is one area an insurer will definitely check in the event of a claim.

3.     Does the policy cover any consequential losses – direct or indirect loss of use, revenue, opportunity or profit – or is this excluded or limited?

Please note that works associated with fire protection are not attractive to insurers who often impose a total exclusion for such work. At best it attracts a higher premium, higher excesses, lower limits and cover is restricted to rectification costs only with no cover for consequential losses.

4.     From an employer’s perspective, how financially stable is the company you may be proposing to engage? They will be required to purchase PI for anything up to 12 years from the completion of their works, so you must make every effort to ensure appropriate PI cover will be in place for the required duration.

A challenging environment

In the wake of the Grenfell tragedy premiums rose exponentially. Many insurance companies excluded combustibility and fire protection from their cover altogether. Since then, fire protection providers will have diligently purchased the widest cover available to them but unfortunately there will be some that continued with little or no appropriate cover, leaving their clients with significant financial exposure. 

Due to the well-publicised financial volatility of many construction businesses, if a PI policy fails and the client has to pursue an uninsured contractor the prospect of success is anybody’s guess and fraught with difficulty.

The insurance market may have softened slightly in the last 18 months with cover becoming more accessible. However premiums and availability remains extremely difficult to attain or maintain. As a result, due diligence for employers and providers must be a key consideration during the pre-qualification process.


Is your business unknowingly at risk?