Design & Construct and PI
The increase in prevalence of design and build jobs has led to building or engineering contractors becoming increasingly exposed to design liability, often because they have in-house design services or because they subcontract out the design element of a project but still have contingent exposure.
Clients will normally insist on Professional Indemnity cover these days. Indeed, with the advent of project partnering and new legal structures in construction projects, even contractors with little or no obvious involvement in the design will often be required to have Professional Indemnity cover.
Claims Examples
- The insured contractor was employed on a design and build basis to construct a hotel. The design works were subcontracted. Clear design errors became apparent during construction leading to rectification costs and delays. The architect had ceased to trade. The architect’s PI policy failed to respond and the contractor was left holding the baby. Amount paid: £850,000
- Following a catastrophic fire in a shopping complex with a number of contributory factors, the fire insurer issued claims against 13 parties including the insured building contractor, alleging that the faulty design of an extractor flue allowed hot gases to build up. Whilst the claim was successfully defended, irrecoverable costs of £80,000 were incurred
- The insured was contracted to design and build a cold storage room in a food processing factory. After completion, the temperature of the room consistently remained too high because of inadequate design. Amount paid: £250,000 plus costs
- The insured designed and built a new car park building. Incorrect structural calculations contributed to total building failure. Amount paid: £550,000 plus costs
- The insured designed and installed the heating and ventilation for a restaurant. Post completion, air extraction and temperature control failed to work properly. The restaurant had to close pending repairs. Amount paid: £150,000 plus costs
- The insured was contracted to design and install a bulk handling system at a quarry. The design of the handling system was subcontracted to a specialist consultancy. Substantial damage was caused following catastrophic failure of the conveyor belt machinery. The contractor’s insurers brought a claim against the specialist designers but still incurred irrecoverable expenses of £62,000
- The insured was contracted for the refurbishment of domestic flats to a previously agreed specification and was asked to fit some additional external balconies not included in the plans. The design of these balconies subsequently led to water penetration into the flats beneath. The builder’s design was found to be deficient. Amount Paid: £150,000.
