Construction Professional Indemnity Insurance: Professionals, Design & Build, and Principal Contractors

Construction projects can create a web of interconnected responsibilities. For example, if a structural failure in a building occurs, who is responsible? Was it the Engineer who undertook the weight-bearing calculation, the Architect who designed the building, or the Main Contractor who supervised and project managed the build?

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Every party within the supply chain could be partly to blame and will require their own legal defence. Ensuring that your subcontractors purchase sufficient PI cover is paramount, or your policy could pick up the short-fall. 

Under the BSA, these roles carry a strict legal duty that the finished building complies with building regulations. Construction PI policies do not cover criminal or punitive fines, however an extension can be included that allows insurers to pay investigation costs of such proceedings brought under the new regulation.

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It’s worth highlighting, we would still recommend that suitable Management Liability Insurance is arranged in conjunction with your PI.

Courts in England and Wales can apply joint and several liability in building safety cases, through statutory mechanisms introduced by the BSA. Which means if three parties are responsible but only one is insured, the claimant can pursue the insured party for 100% of the damages. Therefore, it is as important as ever to ensure your subcontractors purchase sufficient PI Insurance.

The “golden thread” refers to the continuous process of capturing, maintaining, and sharing key design, safety, and construction information throughout the project. Both the principal designer and principal contractor are responsible for contributing to and maintaining this information. 

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When managed correctly, it can support Construction PI claims by providing a clear, transparent record that helps resolve disputes more efficiently. However, if the golden thread is incomplete, inaccurate, or poorly maintained, it can itself become a source of liability, potentially giving rise to PI claims rather than helping defend them.

If your use of AI within the design or specification and the output causes a financial loss to your employer, the responsibility will first fall upon your business. The insurance industry is currently evolving with AI liability. We’d recommend you seek affirmative AI cover from your insurer to provide the required comfort.

PI Insurance operates on a claims made basis, which means cover only applies to work carried out after the policy’s retroactive date. Any acts, errors, or omissions that occurred before this date are typically excluded, even if the claim is made during the policy period. Maintaining your Retroactive Date is therefore critical to ensure continuity of cover for past projects.

Policies will typically exclude claims arising from asbestos due to the long tail nature and severity of associated liabilities. This typically includes exposure, handling, specification, or failure to identify asbestos containing materials. Where exposure exists, specialist contractors who can obtain the correct insurance should be contracted.

How you contract with your employer is an important consideration when managing your risk. If you agree to produce something which is fit for purpose, there is no need to prove negligence and you will leave yourself open to a claim. Whilst agreeing to act with reasonable skill and care, you only need to show you exercised the standard of care to be expected of a reasonably competent professional.

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Most Construction PI Insurance policies will contain an exclusion for liability assumed that imposes greater liability beyond the obligations of reasonable skill and care.

Claims arising from defective workmanship or defective materials will typically be excluded, unless there has been negligence or a breach of professional duty. The cover is designed to protect against your professional service, not a guarantee of build quality.

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Cover for the physical property should be provided under Contractors All risk and Latent Defects Insurance.

Claims arising from issues that were known, or should reasonably have been known, before the policy inception are excluded. Insurers expect full disclosure of any circumstances that could give rise to a claim. Failure to notify such issues can result in declined claims or even policy avoidance.

JCT 2024 Clause 2.17.1 now explicitly limits your design liability to "Reasonable Skill and Care" and expressly excludes "Fitness for Purpose" obligations (unless specifically required by law). This is the recommended approach, as "Fitness for Purpose" is often uninsurable.

Contractors tend to underestimate their exposure to design risk, especially if the majority of the work is outsourced. However, specifying materials, adapting drawings, and coordinating subcontractors, can all create a professional liability exposure. 

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Your contracts will most likely dictate how much cover you require, however you should also take into consideration the size, complexity, and type of the project. As a specialist broker, we can help assess your exposure and recommend an appropriate level of cover, ensuring your cover aligns with both your contractual requirements and your risk profile.

Where no formal appointment has been made, and particularly where there is only one contractor or designer involved, the legal responsibilities will typically default to that party, often as the “lead” consultant or contractor.

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This has important implications for your PI insurance and the percentage of fees relating to principal designer or principal contractor duties should be disclosed within your PI proposal form.