Why do Consulting Engineers need Professional Indemnity Insurance?

31 May 2024

Griffiths & Armour are recognised market leaders in Professional Indemnity (PI) insurance and risk management for construction professionals.

Our involvement with Consulting Engineers Professional Indemnity stretches back more than 75 years and over that time we have established a reputation for delivering honest, consistent and informed advice. We are also renowned for developing exclusive and innovative PI insurance facilities – tailored solutions, with bespoke policy wordings and claims handling protocols, that are designed to safeguard our clients’ interests and support their future growth.

From sole practitioners to some of the largest Engineering consultancies across the globe, we know the importance our clients place on having a trusted adviser and that’s why we build long-term personal relationships through dedicated client teams.

Whether you are working in Civil & Structural, Mechanical & Electrical, Environmental or any other branch of Engineering, it has never been more important to have access to specialist advice from a broker who understands their sector and how best to present their risk to insurers. With the PI market having entered an even ‘harder’ phase in recent years, insurers and brokers are once again being put to the test. We are not immune from the difficulties, but we are helping our clients to navigate through the challenges and have been able to come to the assistance of many firms who have struggled to source insurance solutions elsewhere.

Why do I need Professional Indemnity Cover?

If you are an individual Engineer or a firm of Consulting Engineers providing a service or offering advice for a fee, or even gratuitously, you are likely to need Professional Indemnity Insurance.

Your clients are relying upon your expertise, knowledge, competence, and good judgment and irrespective of the size of the project you specialise in, from small residential to large, complex developments, there will be potential for professional liability exposure. As a construction professional providing advice, design, specification etc., you owe a duty of care to your client and certain third parties and where you are alleged to have breached that duty, you could end up facing a claim.

The cover provided under Professional Indemnity Insurance is primarily designed to protect you in those circumstances and even where you have done nothing wrong, the financial and reputational consequences can be significant.

What does PI Insurance cover?

Professional Indemnity insurance protects you and your business in the event of claimants suggesting they have suffered loss as a result of non-performance, breach of contract and/or professional negligence in the services provided. The insurance should also cover legal and other costs and expenses incurred in the defence of any claim.

Claims come in all shapes and sizes, from minor nuisance matters to catastrophic failures, but they can include claims relating to physical damage, consequential loss, personal injury or disputes around intellectual property etc. The key point is that the policy should respond to claims arising from the provision of professional services.

Why do Engineers choose Griffiths & Armour?

A unique approach

We pride ourselves on adopting a unique approach to serving our clients’ interests and our clients seem to value that too. The knowledge gained from looking after 3,000+ consultancy firms also allows us to design reliable cover that meets our clients’ evolving needs. A number of our PI insurance facilities have achieved global recognition and we invest considerable time working with individual firms on risk awareness – continually looking at new and innovative ways of communicating our messages on risk management.

We are committed to continually reviewing and enhancing our proposition, ensuring that it continues to provide a world class solution to our clients’ insurance and risk management needs.

Advocating on your behalf

We have always believed that we can achieve much more when working in tandem with professional bodies in the areas of education, lobbying and effectively communicating important risk management messages. Of equal importance is the drive to improve the legal and commercial trading environment.

Our involvement at all levels of insurance and construction not only allows us to provide technical support to professional bodies but enables us to become real advocates for change; supporting initiatives to improve the risk profile of Engineers and the legal landscape within which you are operating.

With those objectives in mind, we are proud to work closely with a range of Engineering bodies including:

Our people

Our people are highly skilled, motivated and dedicated to always putting your interests first.

Brokers are encouraged and expected to build lasting relationships with their Engineering clients. They can expect their broker to handle the Professional Indemnity renewal process from the initial information gathering exercise, to securing terms from the insurance market, to presentation of terms and post-renewal support.

That process is characterised by continuous engagement throughout the ‘insurance year’. Whether we are providing contract review advice, offering claims management services, discussing our latest risk management material or providing general day-to-day insurance advice; our experienced team, which includes brokers, risk managers and in-house claims specialists, is fully accessible to support and respond to our clients on whatever insurance or risk management questions or concerns they might have.

Claims support

Unlike most insurance brokers, we have a specialist in house claims team who support our clients from initial notification, to post-settlement ‘lessons to be learned’. Our clients have access to the very best legal and technical advice through our long-standing relationship with a panel of solicitors and experts, each of whom have signed up to our unique claims handling protocols. This also includes providing our professional services clients with reassuring expert legal advice and support, 24/7, when it’s needed most via an exclusive Legal Helpline.

Our insurance market profile

Over many years, we have developed excellent relationships with most insurers underwriting Professional Indemnity insurance. Given the ‘long-tail’ associated with this class of insurance and the notoriously volatile nature of claims, we foster those relationships mindful that their continuity and sustainability are vitally important,

Our standing with insurers also enables us to establish facilities that are unique to Griffiths & Armour.

How much does Engineering Consultants PI insurance cost?

The cost of PI Insurance will depend upon a range of factors such as the sector you are operating in, your risk profile and the limit of indemnity (amount of cover) you choose to purchase. Generally, Insurers will use your professional fess as the basis for premium calculation and it is important that you provide them with a clear overview of your firm.

At Griffiths & Armour we work closely with our clients; helping them to identify any particular risks their business presents, constructing a narrative around why those risks have been identified and explaining to insurers how they have been understood and mitigated.

What action should I take if a Professional Negligence claim is made against me?

If you find yourself in a situation where a claim is made against you then take the following steps:

1. Notify without delay!

You need to advise your contact at Griffiths & Armour as soon as possible of any claim or threat of a potential claim. Your policy requires you to notify a claim or circumstance upon your first awareness of any matter so do not delay getting in touch!

2. Take care responding

You should not respond in detail to any claim or threat of a claim before agreeing the response with Griffiths & Armour and your Insurers. Our dedicated claims handlers will guide you through the early stages of any potential claim however, it is important to remember not to make any admissions or provide a third party with any information until agreed with your Insurers.

3. Provide all information

When notifying Griffiths & Armour of a claim or circumstance you will need to provide copies of any correspondence received or details of any discussion seeking to make a claim or threatening action against you. You will also need to be prepared to gather further background information to assist with the investigation of the circumstances.

4. Questions?

If you are at all unsure whether a letter or verbal complaint needs to be notified to your Insurers do not hesitate to get in touch with your usual point of contact at Griffiths & Armour. Our team will have the experience to help you when you may have a potential claim against your business and will work with you to seek a swift resolution. If you don’t have the contact details to hand, get in touch by using the form below this article and a member of our Professional Risks team will be in touch soon.

How can I renew my PI Insurance efficiently?

PiWorks is our industry leading online renewal platform, available to clients with Professional Indemnity (PI) Insurance via Griffiths & Armour. PiWorks is an efficient and convenient way for you to submit key information to support the renewal of your PI policy. It can also help you streamline your administration processes and saves you time by securely storing your key PI Insurance documentation in a one convenient document portal.

Get in touch with our team to find out more about how PiWorks could help you.

Which other classes of insurance should Consulting Engineers consider?

Given our history and standing within the construction sector, we are often considered to be synonymous with Professional Indemnity insurance and particularly so for Consulting Engineers. Whilst that is reflective of our position within the PI market, our knowledge and expertise extends across all classes of insurance.

We are well placed to support our professional clients with their general insurance requirements for their business or organisation, which includes Office Insurance arrangements, Motor fleet, Public Liability, Employers Liability, Directors & Officers or Cyber and many more.

Our WORKSPACEPLUS+ offering is designed specifically to provide you with everything a traditional office policy can plus a range of enhanced features that can be selected to shape your office policy around the precise requirements of your firm.

FAQs

Here are the answers to some frequently asked concerns regarding Consulting Engineers’ professional indemnity insurance, as well as other popular coverage, whether you’re new to obtaining business insurance or have been in the company for a while.

Author

Graeme Tinney

Griffiths & Armour Europe DAC CEO and Professional Risks Director, Professional Risks Division

Contact

What is Engineering Consultants' Professional Indemnity insurance?

What kind of coverage does a self-employed Engineer require?

Whether you’re a self-employed Engineer or a business owner, there are a range of insurances such as property, business interruption, employer’s liability and public liability that will be required to cover your potential exposure. However, given the nature of what you do and your clients’ reliance of your professional services, Professional Indemnity Insurance will be central to your insurance programme.

If you’re not sure what coverage you require, one of our advisers would be delighted to assist you.

Does Professional Indemnity insurance cover Public Liability?

No, Professional indemnity insurance is a class of insurance in it’s own right. Whilst similar losses may be covered under both classes of insurance, the purposes of the policies and the circumstances in which they respond are very different.

Professional indemnity insurance is designed to respond where the claim has arisen from the provision of professional services.

Is Professional Indemnity Insurance compulsory?

Professionals such as accountants, architects, engineers and solicitors will find themselves needing to hold professional indemnity insurance whether as a result of a legal requirements, the rules established by their professional institute or simply due to the demands of their client. Today, it would be very unusual to see any professional services agreement that does not impose a requirement to maintain PI insurance.

Is physical injury covered by Professional Indemnity insurance?

Professional Indemnity is designed to the insured’s liability for a variety of losses. All insurance policies will contain limitations and exclusions but subject such restrictions, Professional Indemnity insurance would be expected to to cover the insured in respect of liability for personal injury arising from the provision of professional services.

What is the limit of indemnity under a PI insurance policy?

The limit of indemnity is the maximum amount that can be claimed from insurers for the professional’s liability to pay claimant damages. The indemnity limit can operate as ‘aggregate’ or ‘Each & Every claim’:

If it is ‘aggregate’ the insured has one limit of indemnity to cover all claims in any one period of insurance.
If it is ‘Each & Every claim’ they have a separate limit for each individual claim that might arise in any one period.

Generally it is possible to secure cover for defence costs payable in addition to the limit of indemnity.

Even under an ‘Each & Every claim’ policy, the limit of indemnity may be restricted for certain categories of claims such as pollution, asbestos or fire safety.

What can professionals be liable for?

Initially, any potential claimant must prove professional negligence on the professional’s behalf (i.e. a failure to exercise reasonable skill and care in the discharge of its services). A claim can be brought in contract or tort/idelict (i.e. common law). It is often more difficult to succeed in a claim in tort as the following tests must be satisfied:

The plaintiff must prove that the professional owed him a duty of care
The plaintiff must prove that the professional has breached that duty
The plaintiff has suffered financial loss as a direct result of that breach

If an allegation of professional negligence is upheld, the professional is likely to be liable for the losses incurred by the plaintiff which arise as a reasonably foreseeable consequence of their actions. The professional will often be responsible for the plaintiff’s legal costs and these can be substantial. Large sums of money are often spent simply trying to recover fairly minor losses.

Direct financial losses (economic and consequential loss) as opposed to the cost of rectifying a defect are implicit under contract unless specifically excluded. There is more of a grey area arising out of the question of liability for economic and consequential loss at common law although recent judgements have allowed such losses to be recovered.

What limit of cover should I purchase?

The limit of indemnity is the maximum amount that can be claimed from insurers for the professional’s liability to pay claimant damages. Generally cover for defence costs payable in addition to the limit of indemnity can be secured. It is important to note that disclosing the limit of indemnity to a client does not lead to a limitation of liability, which can only be achieved by negotiating a specific financial cap as part of the professional’s appointment.

The limit of indemnity generally operates in one of two ways:

Each and every claim cover – this means that the indemnity limit applies separately to each claim that is made under the policy. However, all claims arising from the same occurrence would be regarded by insurers as one claim

Aggregate cover – the limit of indemnity would apply as one single amount for all claims made in each period of insurance

Policies operating on an each and every basis, would still normally apply in respect of:

Pollution/contamination claims

Claims brought in American or Canadian courts

What is the extent of cover?

Professional Indemnity insurance provides only limited cover against the consequences of claims for professional negligence. Unless contractual limitations have been agreed between the professional and his client, the professional’s liability:

Is unlimited in amount

Extends over a considerable period of time

Professional Indemnity insurance, by contrast:

Will have a set limit on the amount that insurers will pay – the limit of indemnity

Operates for a set period of time – the period of insurance

Is subject to the policy terms, conditions, limitations and exclusions

Operates on a claims made basis