What professional indemnity insurance is
Professional indemnity (PI) insurance addresses a different type of claim from public liability. The loss is usually financial and arises from advice, design or a professional service, rather than from physical injury or damage.
PI policies are frequently written on a claims-made basis. In simple terms, the policy responds to claims first made against you and notified to the insurer during the policy period, and the policy specifies a retroactive date before which the work is not covered. The effect is that cover for past work depends on continuing to hold the policy, or on arranging run-off cover when you stop.
For a contractor, the question is not whether you are a professional in the formal sense, but whether you do things that expose you to this type of claim.
Who may need professional indemnity cover
- Contractors who design temporary works, drainage layouts or other elements of the project as part of their service.
- Contractors who propose value-engineering changes and are responsible for their adequacy.
- Contractors who provide specification, supervision, inspection, testing or commissioning advice.
- Design-and-construct contractors, covered in more detail on our design and construct insurance page.
- Contractors whose contracts require a stated level of PI insurance.
What may be addressed, subject to terms
- Design and specification
- Claims that a design or specification you prepared or approved was negligently done.
- Advice and recommendations
- Claims arising from professional advice you gave to a client.
- Supervision and inspection
- Claims arising from the supervision, inspection or certification services you provided.
- Defence costs
- Costs of defending a claim. Check whether they are inside or on top of the limit of indemnity.
- Work by subcontracted professionals
- Whether the policy responds to your liability for professionals you appoint, and whether those professionals carry their own PI.
Important limitations and questions to discuss
- Claims-made basis and retroactive date
- Understand when a claim must be made and notified, and the date before which work is not covered.
- Fitness-for-purpose obligations
- Contracts that require a design to be fit for its purpose can impose a stricter standard than reasonable skill and care. Such obligations are often excluded from PI cover or require special agreement.
- Warranties and guarantees
- Liability you accept by promising a particular outcome may fall outside the policy.
- Injury and property damage
- Bodily injury and damage to property are normally dealt with under public liability or contract works cover, not PI.
- Faulty workmanship
- The cost of repairing your own defective construction is generally not a professional-services claim.
- Known circumstances
- Circumstances you are aware of before the policy begins are normally excluded and need to be disclosed.
- Run-off
- When the policy ends or you stop trading, claims for past work may still arise. Ask how run-off is handled, and what the contract requires after completion.
Professional indemnity or public liability?
A useful test is to ask what caused the loss. If it arose from what you advised, designed or certified, the claim is likely to be a PI question. If it arose from what you physically did or failed to do on site, the claim is more likely to fall under public liability or contract works cover. Most real situations contain both, which is why they should be reviewed together.
| Situation | Likely area to consider |
|---|---|
| A drainage layout you designed does not achieve the required flow | Professional indemnity, subject to the contract and wording |
| A trench collapses and injures a passer-by | Public liability |
| A temporary works design you prepared fails and damages the permanent works | Professional indemnity and contract works cover, depending on the policy wording |
| You certify that a test has been passed when it has not | Professional indemnity |
General orientation only. Outcomes depend on the facts and the policies.
Information we usually need for a quotation
A PI quotation focuses on the services you provide and the contracts under which you provide them.
- A description of the professional services you provide and what proportion of your work they represent.
- Your qualifications and those of the people who carry out the design or supervision.
- The contracts in which you take design or advice responsibility, and any fitness-for-purpose or warranty clauses.
- Whether you appoint external professionals and whether they carry PI cover.
- Fee income from professional services, and your total turnover.
- The limit and period of PI insurance your contract requires.
- Your claims history and any circumstances that could give rise to a claim.
You do not need everything on day one. A short description of the work is enough to start, and the quote form only asks for the details relevant to your enquiry.
Frequently asked questions
Do all contractors need professional indemnity insurance?
No. It is relevant where you design, advise, specify, inspect or certify. Many contractors only build to someone else’s design. Look at the contract’s risk allocation to see where you carry design or advice responsibility.
What is a retroactive date?
It is the date from which work is covered. Claims arising from work done before that date are normally excluded, which is why continuity of cover matters.
Why does my contract’s fitness-for-purpose wording matter?
Fitness-for-purpose can mean you are responsible for the result, regardless of how careful you were. PI policies are written around a duty of reasonable skill and care, so the two can conflict. Ask for the clause to be reviewed before you sign.
Does PI cover the cost of rebuilding defective work?
Generally no. PI addresses liability arising from professional services. The cost of redoing your own defective work is usually outside the cover.
Related cover
- Design and constructInsurance questions that arise when a contractor takes on design as well as construction responsibility.
- Public liabilityCover aimed at your legal liability to third parties for injury and property damage arising from your work.
- Contractors All RiskCover for the works under construction, such as roadworks, drainage, pipelines and structures, subject to policy terms.
Related guides
- Latent defects explained for contractorsWhat latent defects are, how they differ from patent defects, how liability may continue after the defects period and why insurance does not automatically cover them.
- NEC, FIDIC and GCC insurance considerationsAn overview of insurance considerations under NEC, FIDIC and GCC contracts, why requirements are not identical across forms, and how to check your own contract.
- Construction insurance checklist for contractorsA construction insurance checklist for a broker conversation: project details, contract requirements, covers, plant, subcontractors and comparing quotations.