Professional Indemnity Insurance After the Grenfell Inquiry: What Contractors Need to Know
The release of the final Grenfell Inquiry report marked a significant milestone in the ongoing journey to improve building safety within the construction industry. The tragic events of 14 June 2017, which led to the loss of 72 lives, have had far-reaching implications, not least on professional indemnity insurance (PII) for construction businesses and contractors.
At CONSTRUCTION WARRANTIES & GUARANTEES (CW&G Insurance), we understand the challenges that these developments present to our clients. Let’s dive into how the aftermath of the Grenfell Inquiry is shaping the PII landscape and what it means for you.
The Shift in the Professional Indemnity Insurance Market
In the wake of the Grenfell tragedy, the PII market experienced a seismic shift. Insurers became increasingly cautious, leading to:
- Withdrawal of Cover: Some insurers exited the market entirely, leaving contractors scrambling for alternatives.
- Higher Premiums: Those that remained often increased premiums, reflecting the heightened risk perceptions.
- Limitations on Indemnity Cover: Stricter terms and reduced coverage limits became commonplace, making it harder for professionals to secure adequate protection.
This tightening of the market has forced some contractors to operate without sufficient PII, exposing them to significant risks and potential liabilities.
Impact of the Building Safety Act 2022
Compounding the issue is the introduction of the Building Safety Act 2022, which imposes greater obligations on designers, contractors, and building control bodies. Key changes include:
- Extended Limitation Period: The time frame for making professional indemnity claims has been increased from 15 to 30 years. This means contractors could be held liable for issues arising decades after project completion.
- Increased Accountability: There is a stronger emphasis on the duty of care, with potential legal repercussions for non-compliance.
These changes underscore the importance of having robust PII in place to navigate the evolving regulatory landscape.
Insights from the Grenfell Inquiry Report
While the Grenfell Inquiry’s phase two report was reflective rather than prescriptive, it did offer recommendations that could positively impact PII claims in the future:
- Licensing Scheme for High-Risk Projects: Proposing a licensing system ensures that only qualified contractors work on high-risk buildings, potentially reducing the incidence of negligence claims.
- Personal Undertakings from Senior Management: Legal requirements for directors or senior managers to personally vouch for building control applications may drive greater accountability and diligence.
Implementing these recommendations could enhance industry standards, thereby reducing risks and, over time, stabilising the PII market.
What This Means for Contractors
The current environment calls for vigilance and proactive measures:
- Review Your PII Coverage: Ensure that your policy adequately covers the extended liability period and increased obligations.
- Stay Informed: Keep abreast of legislative changes and industry developments that could affect your responsibilities and risks.
- Partner with Specialists: Work with insurance providers who understand the construction industry and can offer tailored advice and solutions.
Looking Ahead
While there is cautious optimism that the PII market will eventually relax restrictions as the industry adapts, it’s essential to act now. Being underinsured is a risk no contractor can afford to take.
At CW&G Insurance, we’re here to help you navigate these complexities. Our expertise in professional indemnity insurance means we can provide the guidance and coverage you need to protect your business in these challenging times.
Discover more about how we can support you with our Professional Indemnity Insurance solutions here. Let’s work together to build a safer, more secure future for the construction industry.
For personalised advice and comprehensive insurance solutions, contact CW&G Insurance today.