Grenfell and professional indemnity insurance

In August 2018, CIAT were asked by the Ministry of Housing, Communities and Local Government (MHCLG) Industry Response Group (IRG) via the Construction Industry Council (CIC), of which CIAT is a full member, to respond to a second survey on the impact of professional indemnity insurance and the Grenfell Tower tragedy.

In response to the survey issue, CIAT has written directly to the MHCLG and CIC, as from our understanding some insurers are acting in an opportunistic manner, i.e. by trying to increase premiums, whilst at the same time looking to restrict cover.

Seeking to concentrate only on 'cladding' exposures, the insurance market is seeking avoid it and in the majority of cases fully exclude cover.

A small number of insurers are prepared to offer some cover, perhaps full cover, but that is now few and far between. The restricted cover on offer is either limited to 'Rectification' only or insists upon 'Compliance with Regulation', which for a competent professional would be expected. This is virtually impossible and leaves the insured open to legal challenge.

The potential is that some practices simply operate without adequate cover, which would not only leave them and their clients exposed, but would also render them in breach of codes of professional conduct and possible contract terms.

There are some excellent firms that are having to accept any measure of cover they can get irrespective of cost. Cost is nearly irrelevant when the potential uninsured risks are analysed and quantified.

From an insurer's perspective, renewing with exclusions on these 'Claims Made' wordings is effectively passing the risks back to the professional.

What makes this worse is that some clients will elect to renew with total 'Cladding' exclusions when limited cover was available, simply to save an insignificant amount of premium, thus bringing down upon themselves potential financial disaster.

While this legacy risk is a major problem, firms with exclusions or limitations on their policies are still undertaking 'Cladding' work, knowing the risk.

It is also important to note that most insurers do not even recognise an 18 m cut off point, they are applying from ground up.

We have asked that the MHCLG and CIC focus should be to clarify how exposed the professions really are, to put some perspective on the consideration that needs to be taken in respect of policy wording and costs about how exposed the profession really is, and to engage directly with the brokers and underwriters.

All responses are anonymous.

This article was originally published here by CIAT on 30 Aug 2018.

--CIAT