We asked International Marketing and Underwriting Manager (AC & E Professional Indemnity (Pty)Ltd), Andrew Brown, to shed some light on why Design and Construct Professional Indemnity cover is a necessity for builders. Here is what he had to say:
What is PI insurance and who needs it?
Professional Indemnity Insurance (PI Insurance) is available to all companies and individuals who provide professional services to clients. This would include, for example, attorneys, accountants, doctors, etc. In the built environment we offer PI policies to all construction professionals across the entire spectrum of the industry including architects, engineers, quantity surveyors, land surveyors, project managers etc.
Other specific types of PI cover are Design and Construct policies for construction and engineering contractors and Single Project Professional Indemnity which is obtained by many developers of capital projects and embraces the activities of all professionals, including those employed by the Contractor, on that specific contract site.
Why is Design and Construct Professional Indemnity Insurance a necessity for contractors?
In my experience a vast number of contractors misguidedly believe that they do not need Design and Construct PI because the “design is done by the client appointed professionals and not by them”. This is largely true of the Permanent Works but fails to take into account their responsibility for the Temporary Works. They also do not understand that the D&C policy also provides cover for their errors and omissions arising from the supervision of their workforce which results in faulty workmanship.
What risk management plans can be implemented by contractors?
On most contracts, the Contractors are generally required to comply with SANS 1200 series, and of course the Conditions of Contract, Special Conditions of Contract and the Specification. Many contractors go further and obtain an ISO rating which is particularly significant where they have an in-house design team.
What kind of situations usually lead to claims?
Design errors in the Temporary or Permanent Works and faulty workmanship.
What are contractors’ responsibilities in terms of design?
This depends on the requirements that are set out in the particular contract documentation for a contract. In some cases (as in the case of a Turnkey Contract) this will be total responsibility for all elements of the contract. Invariably, they sub-contract some of the elements to outsourced consultants where specific expertise in a particular discipline may be required and these sub-contracted consultants should have their own PI cover to protect their interests.
In other cases, the contractor may only have a responsibility for Temporary Works. What a lot of contractors overlook is that any conscious decision taken on site (for example the spacing of props beneath slabs or whether to shore a trench or alternatively to rely on the sides to be self-supporting) comprise an act of design which would under normal circumstances be considered as an exclusion under the Contract Works policy.
Which other professionals need this type of cover?
This type of cover is widely taken by Civil Engineering and Building Contractors, specialist trade contractors such as Fire Protection, fabrication contractors etc.
To get a Design and Construct Professional Indemnity insurance quote, click here.
