Contractor Professional Indemnity
PI insurance safeguards Design & Construction Contractors against catastrophic losses in the event of legal action due to a negligent act, error or omission by the professional. In addition to claims of error, omission or negligence, PI insurance may also protect against slander, libel and breach of contract.
PI Policy Overview for Design & Construction Contractors
PI insurance offers protection for service errors, contract performance disputes or any other professional liability issues that may occur for Design & Construction Contractors. These policies can include legal defence costs, damages and compensation due to professional negligence, all of which can be substantial.
Professional Indemnity policies generally have both a claim limit and an annual limit, which is based on the insured’s exposure. The claim limit is the maximum amount that will be paid for any single event, and the annual limit is the maximum that will be paid in any one year. Also, common extensions include continuation of cover, liability for loss of documents, and court attendance and staff disruption costs.
There are common exclusions typically found in PI policies, including liability for non-financial losses and intentional, dishonest or fraudulent acts by the professional.
CDM 2015 Regulations Explained
The objective of the CDM 2015 Regulations is to emphasise health and safety through increased coordination between the three primary parties, which are client, designer and contractor. This focus is reflected in the five following key changes:
1. All projects must have the following:
- Workers who have the correct skills, knowledge, training and experience
- Contractors who will provide appropriate supervision, instruction and information
- A written construction phase plan that details the project
2. A build project — regardless of whether it is non-domestic or domestic — where more than one contractor is involved, must have the following:
- A principal designer who is responsible for planning, managing, monitoring and coordinating the pre-construction phase of the project
- A principal contractor who is responsible for planning, managing, monitoring and coordinating the construction phase
- A health and safety file that outlines how to safely perform routine procedures and clean up the worksite
3. For any project, the commercial client must always do the following:
- Provide pre-construction information to designers and contractors, which should outline all known potential hazards that may arise during construction.
- Make arrangements to ensure those carrying out the project can manage health and safety risks in a proportionate way.
- Ensure that both the principal designer and principal contractor comply with their responsibilities and duties, including preparing a health and safety file and a construction phase plan, respectively.
4. If a project is scheduled to last more than 30 days and will require more than 20 full-time workers, or will exceed 500 working days, the client must notify the HSE of the project.
5. The CDM coordinator role is abolished and partly replaced by the new principal designer role.
By adhering to these regulations, you can mitigate your risk of professional negligence claims.
How CDM 2015 Affects Professional Indemnity Insurance
While the changes in the CDM 2015 are wide-ranging, the most important one that affects your PI insurance is the abolition of the CDM coordinator role and the establishment of the new principal designer role.
This new principal designer role potentially exposes you to greater professional liability. The HSE defines the principal designer as a designer appointed by the client in projects involving more than one contractor. Principal designers must have sufficient knowledge, experience and ability to carry out the role. Their main duties include the following:
- Plan, manage, monitor and coordinate health and safety in the pre-construction phase, taking account of relevant information that might affect design work carried out both before and after the construction phase has started.
- Help and advise the client in bringing together pre-construction information, and provide the information designers and contractors need to carry out their duties.
- Work with any designers on the project to eliminate foreseeable health and safety risks to anyone affected by the work and, where that is not possible, take steps to reduce or control those risks.
- Ensure that anyone involved in the pre-construction phase communicates and cooperates, coordinating their work whenever required.
- Collaborate with the principal contractors, keeping them informed of any risks that need to be controlled during the construction phase.
CDM 2015 replaces the old CDM coordinator role with the principal designer on the project team, such as an architect or engineer, but the two roles do not perfectly line up. CDM coordinators were responsible for advising on health and safety risk management matters, as well as CDM compliance. However, not all designers will be able to fulfil their design duties as well as possess the skills and expertise necessary to manage extra CDM 2015 health and safety and risk management responsibilities.
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