This is one of the most common questions we get asked from contractors seeking insurance. A lot of contractors usually need to take out professional indemnity insurance as part of a tender that they need to submit, but don’t really fully understand what cover is provided and how much they need.
Professional Indemnity Insurance covers legal fees against any claims made against you due to damage, as well as any compensation you might owe due to damages. This can be down to faulty design, poor advice and even unintentional copyright infringement.
Most professional indemnity insurance policies for contractors include:
Collateral Warranty Cover – claims that may arise from collateral warranties, duty of care or similar agreements that have been provided by yourself.
Health and Safety Legislation Cover – costs and expenses incurred, that are agreed with the insurers prior written consent, for any defence proceedings brought against you in regard to the health and safety legislation.
Pollution Cover – claims that arise involving sudden or accidental presence, discharge, dispersal, release, migration or escape of pollutants other than asbestos, nuclear or radioactive material.
Defence Cover – cover against defence costs with prior written consent by the insurer.
Fraud Cover – cover for your business to any third-party that results in fraudulent or dishonest conduct of any employee.
Professional indemnity can sometimes be mistaken as being the same as Public Liability Insurance however, the two are separate. Whilst professional indemnity insurance covers you for intangibles, public liability insurance covers material damage. This is damage to property and any injury claims that is a result of negligence from your company. Claimants will be third-party and by having this type of insurance as well as professional indemnity you will cover the cost of claims as well as additional court fees.
However, sometimes what can be confusing is that some professional indemnity insurance policies can cover injuries and property damage, but usually only as a result of incorrect design or professional service.
Both policies though will not cover you against claims because of defective workmanship, which includes physical construction, erection, installation, repairs, service, defective products, defective materials or production techniques.
We recommend, if you are in the construction trade, to hold both types of insurance as they are two completely different things. They are important to have if you are carrying out any construction project, or have a third-party to do the design work for you.