Professional indemnity cover for builders: Here's why it's essential
Whatever you build, whether it's roads, dams or houses, etc, there is a chance of getting it wrong. Let's consider the types of services builders could provide:
- Administering a construction
- Project management
- Design modifications and changes
- Interpreting a design and drafting
No matter how good you are at your job, mistakes and accidents can happen when performing these services - which is why you need the right cover.
Professional indemnity insurance covers you financially should you be accused of negligence and mistakes. As a builder, with so much responsibility, getting cover is simple (just compare online or speak to a broker) and it provides you with peace of mind to get on with your job.
Compare professional indemnity insurance for builders
Further information on Professional Indemnity Insurance for Builders
- Can Builders Benefit from Professional Indemnity Insurance?
- Why is Professional Indemnity Insurance Essential for Builders?
- What does Professional Indemnity Insurance Usually Cover?
- How does Professional Indemnity Insurance Benefit Builders?
- Professional Indemnity Insurance for Builders General Exclusions
- Making a Professional Indemnity Insurance Claim
- Choosing Professional Indemnity Insurance for Builders
- Professional Indemnity Insurance Frequently Asked Questions
Can builders benefit from professional indemnity insurance?
PI insurance offers builders many benefits. As building projects become more complex, development firms have come rely more on outsourcing and subcontracting. With more parties involved in a project, so to is there an increased risk.
PI insurance protects the firm from the cost of delays, repairs and under-serviced utilities. PI insurance gives builders security against any financial fallout resulting from a breach of professional duty. Given the number of risks a builder are exposed to, PI is highly beneficial to maintaining the builder’s financial stability.
Why is professional indemnity insurance essential for builders?
PI insurance protects builders from the risk of litigation. Construction is a high-risk industry and it is crucial for a builder to be prepared against the costly impact of a negligence claim. If a builder gives negligent advice, breaches client privacy or loses vital documents, they may face legal action. The scale and investment of a construction project means that any negligence on behalf of the builder is likely to have severe financial consequences.
PI insurance is essential for providing builders with a financial fail safe should something terrible happen. Aside from the financial security provided by PI insurance, the policy also has other advantages for builders. These include:
- Business continuity. As part of PI insurance, a builder may also be covered for public relations expenses. This means any negative press generated by the claim can be countered to help protect the reputation of the builder and their business.
- Work opportunities. Purchasing PI insurance is a condition of employment for many work opportunities within government bodies and the private sector. By having PI insurance, you have access to greater employment options.
What does professional indemnity insurance usually cover?
PI insurance provides cover for claims made against you for breaching your professional duty. These claims most commonly involve acts of negligence and behaving in a way that is wrongful and/or misleading.
A typical PI insurance policy will provide cover for the following:
- Legal representation. With PI insurance, you are covered for the cost of your legal fees including legal representation, advice and court attendance.
- Compensation. If a client is awarded damages for financial losses caused by a breach of your professional duties, PI insurance will cover the cost of the payout. If the case is settled, the policy will also cover the settlement payment.
PI insurance will provide cover for builders who breach their professional duty in respect to common, statute and/or contractual law. This includes cover for unintentional slander, libel and defamation, loss or damage of documents, unintentional breaches of the trade practices act, employee liability such as unfair dismissal and harassment, dishonest acts of employees, run off protection for outgoing partners and unintentional breaches of copyright law.
Each PI insurance policy is tailor-made to address the risks of each industry. Builders working in the construction sector would have access to coverage that is specific to their workplace and clients.
How does professional indemnity insurance benefit builders?
PI insurance benefits its user by providing financial security from expensive professional indemnity claims. Its primary objective is to protect working professionals like builders from financial loss. According to the Insurance Council of Australia, approximately 70% of uninsured and underinsured small businesses do not recover from a major insurance claim.
Having protection against potential legal claims, a builder can work without worrying if their actions or advice is in breach of their professional duty. This is useful or a builder who wants to innovate but is concerned by possible financial ramifications.
PI insurance also benefits its user by mitigating the risk of human error. Clerical mistakes are inevitable in most work situations. Documents can be lost or damaged, not out of malice but from human error.
PI insurance ensures that a builder is not financially punished for these mistakes.
Professional indemnity insurance for builders general exclusions
PI insurance is subject to some exclusions. These may change depending on the specific policy. Examples of typical exclusions may include:
Claims that arise from acts of cybercrime are not covered by PI insurance. This means that if the claim brought against you relates to a virus, worm or any other harmful code or software, you will not be covered.
If the claim against you arises from the management, ownership or control of your property and not from your professional services, PI insurance will not cover the expenses of the lawsuit.
Claims that were made either formally or informally before your insurance period are exempt from cover.
While PI insurance protects you against claims made by clients, it excludes claims made against your liability as an employer.
A claim that arises as a result or consequence of an act of terrorism is not covered by PI insurance.
Making a professional indemnity insurance claim
The building sector comes with many litigation risks. Whether you are part of a small, medium or large construction firm, you may be held liable for financial losses as a result of a breach in your professional duties.
For instance, if a large building and construction firm is contracted by a developer to build an office building and in the process of completing this project, the firm hires a subcontractor to design the electrical system. The system proves faulty and the developer sues the firm for failing to deliver the project as promised. In this situation, the firm can seek cover from PI insurance.
For a builder or private contractor, a claim may arise if exceptional circumstances such as poor weather conditions prevent a contractor from complying with their professional duty to complete the project by the set deadline. Other claims may arise due to negligence, damaging documents and misleading conduct.
Choosing professional indemnity insurance for builders
When choosing a PI insurance policy, builders must consider various factors. The first factor to consider is the insurance provider. Ideally, a builder should look to find a provider with previous experience in the construction industry.
Understanding the risks that are specific to your industry will help ensure the insurance provider covers all eventualities. A provider should also be chosen on the basis that they can provide adequate professional insurance for your business.
So do your research. Compare the cover offered by various providers to find out how comprehensive a policy is and then weigh up the costs.
Once you have chosen a provider, be sure to read the terms and conditions. Most insurers will be able to tailor the policy to your needs.
Also consider your long term plans. As your business grows, you will need an insurance policy that can grow with you. Think about how your risks and circumstances may change and find an insurer who can provide PI insurance that accommodates your business plans.
- Who is a professional? A professional is anyone who provides services or advice in a professional capacity. It may refer to a person whose skill in a particular discipline holds real currency. This could apply to a building consultant, advertising agent or sound engineer.
- Is PI insurance compulsory? While PI insurance is not a legal requirement, firms looking to subcontract builders often require that there is a PI insurance policy in place.
- Can I choose my own lawyer to represent me against the professional indemnity claim? In most cases, given the cost of representation is covered by the insurer, you will not be given the option to choose your legal representative.
- What protection does PI insurance provide? PI insurance protects your personal assets from being liquidated in the case of a professional indemnity claim.
- Can I receive short-term PI insurance coverage? If you cancel your PI insurance after the expiration of a short-term contract you will not be eligible claim for the work you have completed.
- When should I notify my insurer of a situation which may lead to a claim? It is crucial to contact your insurer to advise them of the circumstances that may lead to a claim. Failure to disclose this information may cause your insurer to deny your cover. If you change insurers, it is particularly important that any prior claim is disclosed.
- What is a "retroactive date"? A retroactive date refers to the day from which you are covered by insurance for any omission, negligence or wrongful acts that may lead to a claim.
Professional indemnity insurance protects you against the cost of legal representation and compensation cases of a claim being made against you. If you are a builder, it is important to consider purchasing PI insurance to safeguard your financial assets and the continuity of your business.Back to top