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Construction Professional Indemnity Insurance,

Construction Professional Indemnity Insurance

Construction professional indemnity insurance from Hensure is available to buy online, or you can talk to your own dedicated advisor who will ensure you receive the correct advice when buying professional indemnity insurance.

The construction industry employs more than 2 million people in the UK and accounts for around 6 % of the country’s GDP.

A vast number of different types of professionals and contractors can be employed on a construction project and it all depends on the size of the project.

A typical project could involve:

The client or employer
The architect
The main contractor
The sub contractor
The quantity surveyor
The clerk of works
The project manager
The structural engineer
The building services engineer
The building surveyor
The planning supervisor
The land surveyor

 

 

 

 

The type of construction professional indemnity insurance cover your company needs will very much depend on the role your firm performs under the contract.  The architect will be obliged to buy an architects professional indemnity type policy cover that is approved by RIBA.

If your firm is very much involved in the hands on build process- as main contractor or one of the sub-contractors then it is likely that you will need to consider buying professional indemnity cover on the basis of a design and construct professional indemnity type policy wording.

The various Engineers will want to buy cover on a consulting engineers type policy cover.

If you are a Surveyor then the Professional Indemnity cover will either be on a RICS (Royal Institution of Chartered Surveyors) approved policy wording for surveyors, or possibly a construction professionals wording if your firm are not a RICS member.

If your firm acts as a clerk of works or a project manager then the most appropriate policy form may well be could be a construction professionals wording too, but again it depends if you are RICS members.

Collateral warranty cover

If you are a construction professional or contractor then it is essential that your professional indemnity policy wording includes a collateral warranty extension.

What is a collateral warranty?

On a construction or engineering project, a collateral warranty is a contract under which a professional consultant (such as an architect), a building contractor or a sub-contractor warrants to a third party (such as a funder) that it has complied with its professional appointment, building contract or sub-contract.

What are third party rights?

A third party right is the right of a person who is not a party to a contract (a third party) to enforce the benefit of a term of that contract.

For example, that could include a right for a funder to enforce a term of:

  • A professional appointment entered into between the employer and its architect, engineer or quantity surveyor.
  • A building contract entered into between the employer and its contractor.
  • Typically, a construction contract states that a third party cannot rely on the Contracts unless the contract expressly grants third party rights. Usually, a construction contract that uses third party rights sets them out in a schedule to the building contract or professional appointment.

Why are collateral warranties and third party rights needed?

A construction or engineering project needs collateral warranties or third party rights for three main reasons:
Privity of contract prevents third parties relying on other people’s contracts. Unless you are a party to a contract or section 1(1) of the Third Party Rights Act 1999 applies, you cannot enforce a term of a contract.

They provide construction security. If something goes wrong on a project, a funder does not want to be out of pocket; it wants to be able to claim its losses directly from the person who caused the loss, such as an architect or a contractor. Without a collateral warranty or third party rights, a funder may be unable to make an effective claim.

A claim in tort is unlikely to succeed. The law of tort in England and Wales does not generally allow a claim for pure economic loss, such as damage caused to a building by a defect in that building; you need a contract.

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Who gets collateral warranties or third party rights?
While specific requirements vary from project to project, an employer typically asks its professional consultants and the contractor to agree to provide collateral warranties or third party rights to:

  • Any funder.
  • Any buyer (often referred to as a purchaser).
  • Any tenant (or a given number or class of tenants).

An employer may also require its contractor to obtain collateral warranties from all the contractor’s sub-contractors or selected key sub-contractors.

Hensure Business Insurance has developed an online system that will quote for many construction professionals on-line without the need to fill in a lengthy proposal form. We also have access to a large panel of Professional Indemnity insurers should your particular risk profile fall outside of the acceptable underwriting criteria for buying a policy on-line.

All of the appropriate policy wordings contain a collateral warranty extension as standard, and we also have access to a panel of experts who will offer a collateral warranty checking service for existing customers.

See also;

Building project managers
Clerk of works
Estimators
Construction project managers
Building surveyors
Party wall surveyors
Quantity surveyors

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