What are your thoughts about the ever increasing difficulty for Contractors and Consultants ability to obtain PII & their obligations thereafter ?

Question

Andrew Crawford · Accepted Answer

Andrew hi

This is such a concern for the many design consultants, contractors and indeed, Sub-Contractors with design responsibility.

Invariably there are not many choices to manage and/or restrict the increase in premium cost and it all depends upon what the Employer requires as typical contract requirements are "any one claim" and "in the aggregate". There is however the "round the clock reinstatements [RTC] cover which may be used when there are excess layer policies in addition to the primary PI policy.

I reviewed an article by Brunel professions on this which stated that when the limit on the primary policy is exhausted, the excess layer insurer drops down to deal with claims, until its limit of indemnity is exhausted. If there are additional excess layers higher up the programme, this process continues until the entire limit of indemnity is exhausted. Only when the whole limit is exhausted across the programme of insurance policies is the limit of indemnity reinstated and at this point the primary insurer becomes the first port of call again. As a result, if there is significantly adverse claims experience, the primary insurer can be insulated from multiple losses.

An alternative to the above that I was involved with was when a firm self-insured up to a specified limit from its retained profits. Above that self insured limit, the firm can then obtain third party insurance from more than one insurer. For example, the firm itself covers any insurance claim up to £1m from its retained profits, from £1m to £3m, this is covered by insurer B, from £3m to 5m by insurer C and from £5m to £10m by insurer D.

There is also the discussion with the Employer to share in the total increase in premium cost for the six or twelve year liability period as well as the option of total project insurance route to cover the liability period which is not used to the extent that it could.

If on the other hand the insurance becomes commercially unviable after PC for example, contracts tend to include a provision for notifications to the Employer and a subsequent discussion on the issue to resolve how to deal with the substantial increase in premium. An option can then be put forward to the Employer to share in the increase premium cost.

What are your thoughts about the ever increasing difficulty for Contractors and Consultants ability to obtain PII & their obligations thereafter ?

contractor

consultants

Andrew Lowe

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