Defective Design & Professional Indemnity Insurance

Professional Indemnity insurance covers your professional risk as a builder, often where you are providing incidental design services or construction management services.

This cover is tailored for professionals who provide advice or services for a fee where a claim has been made against you by a third party for damages or financial loss.

Design & Construct – Professional Indemnity – Claims Examples

Example 1

A building surveyor was engaged to issue a building permit and the required certificates, including the final Certificate of Occupancy for a residential construction. Some years after completion of the house, the owners noticed significant movement and cracking. The owners sued the building surveyor and the home warranty insurer. The building surveyor then joined engineers, the manufacturer of the footing system, the installer of the footings and the building company.
The allegations against the building surveyor were that he was negligent in issuing the permit and certificates because he should have recognised the deficiencies in the various engineering plans, designs and computations. He asserted that it was not the role of a building surveyor to check such documentation, rather, his duty was to certify that the steps required under the Building Act had been carried out by the appropriate registered building professionals.
The building surveyor had also obtained a compliance certificate prior to the consultation and was therefore granted statutory immunity.
Responsibility for the design flaw was passed to the building company who alleged that the flaw in design was caused by the engineers.
The building company had no insurance for design issues and could therefore not continue to fund the legal costs proving it was the engineers fault.
After four years of litigation the claim settled for over $1million plus legal costs, with a substantial contribution from the building company.

Example 2

The Insured was instructed by the main contractor to design, supply and construct the timber frame for a new primary school. The claim concerned the structural failure of the school’s floors/ceilings, leading to its closure, remedial works and associated costs. The cause was originally considered to be the failure of the glue product used rather than the Insured’s specification. However following the disclosure of new expert evidence, the claim was amended to include design defects.

If you are unsure if your business has an exposure in this regard, contact the team at ProBuild and put your mind at ease.