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Construction project managers professional indemnity insurance

Construction project managers professional indemnity insurance

The construction sector now engages a broad range of professionals, each with a tightly or loosely defined role, depending upon the size and complexity of the job.

Your role of a project manager is an obvious development in the evolution of the modern construction industry but it is still seen as an emergent professional discipline.

The normal functions of a construction project manager will be to ‘mobilise, organize and co-ordinate the activities of a multi-discipline team to complete a project on time, to budget and to a good quality’

However this general definition of the role is unlikely to assist on the question of duties owed by, or expected of a project manager.

The ambit of a construction project manager’s responsibilities will depend on:

  • The terms of their appointment
  • The terms of engagement of other consultants
  • The principal building contract

The demands of the particular contractThis was highlighted in the following court case

Pride Valley Foods Ltd v Hall and Partners ( Contract Management) Ltd ( 2000)
“ There is an initial difficulty in accepting expert opinion evidence in relation to the duties of project managers…. In so far as it may be appropriate to accept expert evidence, the nature of the evidence that might be acceptable will depend on what the PM has agreed to do. In some cases the PM will be the architect who will design the project and then, acting as PM, supervise the contractor and the sub-contractors carrying out the work….At the other end of the scale the PM will supervise the work of the contractor and sub-contractors and ensure that the work is carried out in conformity with the design drawings. In these circumstances the PM will have no design function even to the extent of providing an outline specification. This bears no relation to the function of the architect acting to project manage his project.”

 

According to statistics professional indemnity claims in the construction industry are on the rise. The recent global economic crisis has not helped. Professional indemnity claims against construction project managers are usually ancillary to claims made against other parties on the project.

The usual reasons put forward by clients tend to be that the project manager has failed to;

  • Control particular aspects of the costs
  • Ensure that the other construction professionals had access to correct information
  • Prevent another construction professional from making an important error.

Hopefully the above should give you enough insight in to why it is important that a construction project manager buys professional indemnity cover.

What should you look for when buying a policy?

What limit of indemnity do you need for professional indemnity insurance?

The limit of indemnity that you require under your policy is generally for you to decide based upon your own assessment of the exposures that you face in your business. It is worth bearing in mind that the costs involved in defending professional Indemnity claims can be astronomical so this needs to be taken in to account. It may also be that your client insists on you buying a certain level of cover as part of the tendering process so the decision may be taken out of your hands to some extent.

 

Any one claim or aggregate cover?

It is important that you know the difference between the types of cover that are available in the market as they can make a huge difference to the cover in the event of a claim. It can also make a big difference to the premium charged.

If a policy is written with cover ‘in the aggregate’, with say a limit of indemnity of £1m it means that this is the maximum your insurer will pay for all accumulated claims in one policy period, including associated legal costs.

If your policy is any one claim, that same £1m level of cover applies to each claim – regardless of how many claims you make. Usefully, the legal costs are paid in addition to this and to the same level of cover.

In effect, each claim has a £2m total fund, split half and half for damages and legal costs.

Claims made basis of cover rather than claims occurring basis.

It is important to understand that professional indemnity policies are written on what is called a ‘claims made’ basis. This means that they provide cover for claims made against you during the policy period (i.e. after the inception or renewal date) that relate to work that you have done at any time after the retroactive date.

What is the retroactive date under a professional indemnity policy?

Policies on a claims made basis should include a retroactive date to protect the policyholder against claims in respect of work undertaken prior to the current policy year. The retroactive date should coincide with the date you started trading or the effective date of your first professional indemnity policy. It is possible to arrange a policy with retroactive date of none, which effectively provides cover in respect of all previous periods.

How much is your professional indemnity insurance going to cost?

The cost of your professional indemnity cover will depend upon a few key factors including the exact nature of the work you undertake, your annual turnover, your previous experience and whether you have previously had any claims made against you.

Hensure Business Insurance is able to quote for a number of construction project manager risks through an online portal without the need to fill in a lengthy proposal form. We also have access to a number of professional indemnity markets if some aspects of your particular risk profile do not fit through the on-line portal. Try us today to get a competitive quote.

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