Post Grenfell challenges for Professional Services

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We have produced this update to follow up on the challenges now faced by a number of professional services firms, including architects, engineers and design and build contractors seeking renewal terms for their professional indemnity insurance (PII) following the Grenfell Tower tragedy.
 
PII Insurers position on cladding
Due to the scale of the problem, concern in the insurance industry has evolved and many Insurers are now dealing with numerous claims which involve cladding and its fire safety and as a result, are looking to scale back on their exposure in this area and in some cases are restricting cover or at worst, declining to renew.
 
This means Insurers are scrutinising those firms involved in the design, specification or installation of cladding, as well as where professionals owe a duty to warn which is almost certainly the case if you have been specifically retained to supervise, inspect or monitor, including where you have subcontracted these services.
 
The restrictions in cover vary from Insurer to Insurer and will depend on their view of the risks involved but they include changing the limit of indemnity to an ‘aggregate’ basis for any claims involving cladding or applying policy exclusions in respect of claims arising from work involving ACM panels. We are also seeing Insurers managing their exposure by reducing their participation on certain accounts, so going forward we may see more policies being shared among multiple Insurers. 
 
Insurers will consider each firm on their own merits and will require a specific cladding questionnaire to accompany the proposal form at renewal. The answers given will determine Insurers commitment to providing cover going forward or whether they decide to restrict cover in some of the ways mentioned above.
 
From our own experience in helping a number of firms who have had difficulties obtaining reasonable renewal terms, as long as the right questions are asked and firms can demonstrate that they have undertaken a thorough review of their cladding contracts and found limited exposure, then we would expect renewal terms to be reasonable and any restriction in cover, if any, to be limited.
 
Some of the common questions and information you need to consider, in good time prior to renewal are outlined below but these will differ from Insurer to Insurer and will be dependent on what type of professional services you provide:  
 
- Have you been involved with, including designed, installed, procured or specified any cladding;
- Have you been involved with any cladding projects where Aluminium Composite Panels have been usedDo any of these projects exceed 18 metres in height;
- Have you been involved in any way with the testing, specification or sign off of any cladding system;
- Have you received or dealt with any complaints or issues on any cladding projects for which you have provided a professional service;
- Details of the five largest cladding projects that you have provided a professional service.
 
Conclusion
It is important that you provide renewal information as early as possible before your renewal date in case there are complications and/or Insurers require further additional information.
 
Insurers will look favourably at firms that can demonstrate they are proactive in managing their risk so we recommend undertaking a thorough review of all projects involving buildings with cladding undertaken in the past 12 years as soon as possible.
 
You should notify your broker immediately if, when undertaking a review of your work, it highlights a particular concern about any past or present projects you have been involved in or if one of your clients has raised a question about the type of cladding used, whether government guidelines have been followed or whether it complies with building regulations and fire safety. Care needs to be taken on what is being notified and you should seek advice in this regard.
 
For any current or future cladding projects you need to consider carefully your approach to cladding and maybe put in place additional protocols; making sure your scope of duties/responsibilities are very clear, provide additional training, limiting your liability under contract and anticipating likely changes to Building Regulations.
 
We hope this note will help you to prepare and anticipate for any issues on the horizon and we will continue to communicate any further updates that we receive from the PII market along with any recommended actions you can take to mitigate a negative response from Insurers.
 
In the meantime, please get in touch with a member of our team if you would like to discuss any of the points mentioned.

About the author

Matt Farman

Professional services firms +44 (0)20 7133 1565 Email