Importance of Construction Indemnity Insurance to a Construction Professional

In looking to discuss the importance of professional indemnity insurance to a construction professional, this essay will identify the legal responsibilities that can be placed upon any construction professional through also evaluating examples of the tortious and contractual liabilities that arise when the professional standard is not met. This essay will also examine professional indemnity insurance’s role regarding the liability of a construction professional in carrying out their actions as part of the process of construction in keeping with professional bodies standards. Then, finally, it will conclude with a summary of the key points derived from this discussion with a view to recognising the importance of professional indemnity insurance to a construction professional.
To begin with, in recognising the legal responsibilities placed upon any construction professional, generally, all construction professionals owe a duty of care (McFarlane v. Tayside Health Board) to others in their work through, for example, the Institution of Structural Engineering (‘IStructE’), the Chartered Institute of Building (‘CIB’) and the Royal Institute of British Architects (‘RIBA’) and in keeping with the codifications provided for by the Construction (Design & Management) Regulations 2007 and Housing Grants, Construction & Regeneration Act 1996. But, in view of their membership of such professional bodies, anyone who holds themselves out as having a certain skill or expertise cannot be held to the same standard expected of an ordinary man (Bolam v. Friern Hospital Management Committee & Plant v. Adams) and novices are not given any ‘special’ dispensation just because they lack experience (Nettleship v. Weston). Moreover, by way of example, whilst there is a need for ongoing inspections by the architect to make sure work is being undertaken safely (Ian McGlinn v. Waltham Contractors Ltd), they cannot be held accountable for every detail (East Ham Corporation v. Bernard Sunley & Sons Ltd) and so they cannot be responsible when defects later arise (Corfield v. Grant). But then although an architect can only have utilised their best endeavours for achieving safety (RhodiaInternational Holdings Ltd v. Huntsman International LLC), an engineer may still be held accountable for any serious breach of safety (Hart Investments Ltd v. Fidler & another) as a reflection of the fact that the standards of care that different construction professionals are held to will vary.
However, a construction professional can also incur contractual liability in relation to their work. This is because they can be considered to be liable for failing to produce work that is fit for its purpose, for breaching warranties or guarantees as part of their agreement and for liquidated damages. Therefore, by way of illustration, it was recognised in Greaves & Co (Contractors) Ltd v. Baynham Meikle & Partners that the designers breached an implied term of their contract that the design would be reasonably fit for fork lift trucks after they were told the first floor had to be able to take their weight and it was not able to do so. As a consequence, it is also understood that during the process of design (London Borough of Merton v. Lowe) a designer has a duty to amend their design if it appears to be defective during the actual process of construction when their work is being put into practice and erected. This is because, as was recognised in Viking Grain Storage Ltd v. TH WhiteInstallations Ltd, there has to be a degree of reliance on the part of the purchaser on the construction professionals to carry out their work to the best of their ability and a duty to warn of any apparent defects that arose in the course of the construction process (University of Glasgow v. Whitfield & Laing) to then effectively limit their liability.
On this basis, professional indemnity insurance’s role regarding the liability of a construction professional in carrying out their actions as part of the process of construction effectively means this kind of insurance provides cover for claims brought against the policyholder in keeping with section 13 of the Architects Act 1997 to be read in conjunction with Pepper v. Hart when setting professional standards for, by way of example, architects. This kind of insurance serves to provide for claims arising due to their professional negligence that may be made against loss arising from a claim for breach of duty that may be made to the insurers during the policy period and may also cover them in the event of civil liability arising where there is a breach of contract or a claim in libel (Lloyds TSB General Insurance Holdings Ltd & others v. Lloyds Bank Group Insurance Co Ltd). But, according to the Architects Registration Board Professional Conduct Committee in the Matter of Robert Daw (054720D)(2008) it was recognised that, in order to maintain the benefit of this kind of insurance cover, it is necessary to maintain adequate and appropriate professional indemnity insurance whilst also providing evidence of it in the course of their employment. Moreover, in looking to maintain coverage it is also necessary to keep those underwriting the policyholder aware of potential risks with an ongoing process of ‘notifications’ (HLB Kidsons (a firm) v. Lloyd’s Underwriters subscribing to Policy 621/ PKID00101 & others) in an effort to guarantee that they are effectively covered against any reasonable risks arising in the course of their employment in construction.
To conclude, having sought to discuss the importance of professional indemnity insurance to a construction professional, it is clear professional indemnity insurance goes some way to limiting the personal liability of construction professionals in the event that their actions or inactions, in the course of carrying out their profession, serves to cause an injury to another person. This is because otherwise it is to be appreciated that liability may arise both in contract and in tort regarding a construction professionals conduct to the detriment of a particular workers ongoing career. But, at the same time, it must also be recognised that, regarding professional indemnity insurance, to maintain effective coverage a construction professional must not only obviously keep up with their policy payments, but also keep their underwriter abreast of the events that are likely to need coverage to limit their liability and provide evidence of their having effective coverage in the course of their work.