You are on page 1of 4

Insurer: provides insurance

Broker: facilitates and provides guidance
Insured: seeks insurance
Causes for insurance: tort of negligence, legal liability (e.g. breach of duty to
the public, to third-party)
Insurance covers: property/material damage, personal injury, economic loss
(e.g. financial, due to delays, etc).
Policies: set the terms of the insurance. Policies of indemnity. The policy is therefore written
on the basis that it covers claims made during the period of insurance. The period of insurance of professional indemnity policies is usually 12 months.
It follows that a professional indemnity policy will cover claims made against the insured during that 12-month period.

Premiums: annual payment
Insurance coverage: limit to indemnity. It also covers the legal costs of
defending themselves when allegations of negligence are brought against
Adjusters: they survey, investigate, report and set the monetary value of the
dispute (i.e. quantify the loss).
Solicitors: know the law and proceed with claims in litigation process. They
assess the tort, not the monetary value.
PII: to provide indemnity when negligence in the exercise of the construction
Negligence: not exercise the reasonable care and skill of a competent
Fitness for purpose (warranty of performance): works as intended (by the
owner). This extends the liabilities and hence the risks for consultants. Also, it
might be excluded from policies as abnormal duties or extended
responsibilities not covered... IT imposes a higher duty to achieve a specific
Need to find ways to limit liability vs. clients trying to increase it.
PI Claim: situation or event that requires the intervention of the insurance.


can be as a result of problems such as; delays, changes, unforeseen circumstances, insufficient information, and conflicts. Claims might be made
for loss and expense, extension of time,

damages and so on

Duties of parties: good faith, disclose the facts, to understand the risks. Also
from insurers to advise and pay if it’s their right.

5) Improve education regarding “fair risks”. Problems of the industry: 1) Waste of litigiousness 2) Increase liability and rise (escalating) in premiums and sums paid out for insured costs leads to extreme caution. 3) Set databanks to minimise defects or problems for future. a multiple of the fee). Create direct contractual relationships between parties that would not otherwise exist. 4) Explore more alternative dispute resolutions. 4) Rising of claims can hinder development of smaller companies.Collateral warranties: again. What we can do: 1) Make sure agreements are written in e clever way (but even-handed!). Written specific. as in this case the contractor is more seen as a seller of goods (not a service) and hence implied responsible for the FFP. Increases construction costs b. Reasonable skill vs. Differentiate negligence (breach of tort) from errors of judgement (not liability of a professional). extension of responsibilities. or persuaded and they can take parts. 2) Better define or show what standard procedure is and what it is to be expected. fitness for purpose or other form of extended liability. . Summary: avoid collaterals. FFP: this is especially problematic in D&B contracts. reduce incidences and hence reduce losses of premiums. Stifles innovation and the raise of standards. 3) This has the effect that: a.g. Limit liability in writing (e. They can become unreliable. Continuing duty to warn! Problems with expert witness: they can be swayed. complete and relevant. Law of contribution: shared responsibility means that you can pay 100% regardless of your contribution. A typical example would be where an architect of a new office development owes a care to an occupier of the development in so far as any subsequent defects which may arise are concerned.

“In performing the Services the Consultant shall exercise all the reasonable skill. care and diligence to be expected of an appropriately qualified and competent consultant experienced in carrying out equivalent services for developments of a similar size. a consultant should be aware of not entering into a collateral warranty with a fitness for purpose obligation as he will automatically It is of fundamental importance for both parties to consider the issues relating to risk and responsibility when negotiating any construction contract. not only do PI policies generally expressly exclude a fitness for purpose risk (since it is difficult to quantify this risk in respect of both probability of occurrence and magnitude of loss).e. thereby imposing a reasonable skill and care obligation with the intention of overriding any implied or common law fitness for purpose obligation. some may even be completely invalidated if a consultant has agreed to any fitness for purpose obligations within an appointment. Where a defect arises and no allegations of negligence are made (when the employer doesn’t need to prove negligence. as a reasonable skill and care clause may not offer much protection against an absolute obligation to achieve a certain standard of work. Further. Absolute obligations for fitness for purpose relating to design (regardless of whether that obligation includes such express wording) should still be approached with caution and diluted where possible. a failure to exercise reasonable skill and care). employers need to be careful too as this may seriously limit their potential for financial recovery. value and purpose to the Development. Employers must balance their desire to ensure that the completed works fulfil their requirements against the danger of imposing uninsurable obligations. if necessary. For contractors. it is reassuring that many design and build contracts (for example. scope. the JCT and ICE contracts) contain express provisions which absolve the contractor from a fitness for purpose obligation.” Most professional indemnity (“PI”) policies will cover the holder only in the event of a claim arising out of the holder’s professional negligence (i. This leaves the designer uninsured against a contractual claim for breach of a fitness for purpose obligation. why would he allege it?). They limit the contractor’s liability for design to the standard required of an architect or other appropriate professional designer. DISPUTE RESOLUTION: . Even if an appointment expressly provides for a performance obligation of reasonable skill and care or is silent on this matter. Whilst the consultant may therefore suffer uninsured losses. counterbalanced by seeking to limit their overall liability under the contract or else by pricing it into the deal – but always with the awareness of the consequences for PI cover. In light of the potential absence of insurance coverage. the policy is unlikely to respond to the claim and insurers may refuse to pay costs associated with the defense of the claim. complexity. but particularly where design and build are combined. the risk of performance to a higher standard must first be identified and.

IT has timetable and is binding.1) Litigation: going to court (TCC) to resolve a dispute : provides extreme decision (not settlement) but can increase costs (although might be fast) 2) ADR: need to be specified in the contract (JCT NEC. Private. Combination (tiered) 3) Effort to promote ADR. a. Legally binding. Speedy and less expensive. c. Adjudication: if not specified. Gives assessment and assists. including possibility to not awarding the legal costs payments if considered the . Negotiation and good faith. Arbitration: third party decides. b. Agreement is written down and is binding. It investigates (initiative). Mediation: mediator promotes an agreement that is considered acceptable by both parties. d. then it is statutory procedure. Expensive. etc).