Design and Construct has become increasingly popular with contractors taking on a design liability, either by employing their own in-house professionals or by assuming a liability where they sub-contract out the design element. Design alterations during construction can also expose even the most basic contractor or firm.
When you undertake contracts on a design and construct basis it is you who will be the client's first port of call in the event of a design related problem. Even if a claim is ultimately the responsibility of another party, the costs of redirecting liability can be high and success is far from guaranteed. You will be responsible regardless of your ability to enforce an action against the negligent party.
This is where a Design and Construct (D&C) Professional Indemnity Insurance (PII) policy comes into play, protecting both your finances and your relationship with your client. When problems do occur a swift and realistic approach is needed, particularly when the problem arises during the construction period.
Premium calculation factors:
| The size of the firm | One of the major factors that determine insurers’ rating and underwriting criteria is the size of the firm. This can be established by looking at the number of employees and directors as well as the turnover and number and size of contracts in which they are involved. |
| Qualifications and experience | There is no professional body for contractors. It is for this reason that insurers have to pay careful attention to the qualifications and experience of the principals and staff. If a contractor is offering professional services then insurers will expect to see qualified staff, such as a qualified Architect, Engineer or Surveyor. If there are no qualified staff, then insurers will want to see CVs of those involved in technical work, normally demonstrating at least five years' practical experience, and possibly more depending on the services offered. |
| Contract sizes | Clearly the size and scope of a building project is an important consideration for underwriters. Large complex works involving structural engineering are considered higher hazard than lower value ‘standard’ buildings such as houses, offices or shops. |
| Technology | Is the firm using 'cutting edge' technology or standard, tried and tested processes? Tried and tested techniques are seen as lower risk. |
| Overseas exposure | Does the contractor carry out work for overseas clients? Careful consideration would be paid to such work especially in the USA. |
| Environmental exposure | Does the contractor knowingly get involved in the environmental field such as clearing brown field sites for redevelopment? |
| Asbestos exposure | Does the contractor get involved in the identification and removal or handling of asbestos? Often policies exclude or severely restrict the cover for such work. |
| Cladding / glazing exposure | Does the contractor get involved in cladding? This is a specialist area and has encountered many problems over the years and so the contractors experience in this field is key. |
| Claims experience | The claims experience is an important determining factor in the assessment of risk. This information usually reflects the type of work carried out by a firm. It also reflects the quality of the firm's work, staff, internal risk management and experience. |
Alan Newall
