NEWS / Affiliate / Insurance restrictions emphasise the need for collaboration

Affiliate

09 OCT 2020

INSURANCE RESTRICTIONS EMPHASISE THE NEED FOR COLLABORATION

James Burgoyne of Brunel Professions highlights the importance of collaborative working in façade and fire safety

Partnering clauses have been a component of many appointments for some time now, and have featured in standard contracts.

The construction sector has nevertheless continued to be markedly more adversarial than other professional sectors. As such, onlookers might have considered that the partnering clauses in contracts represented more of a future ideal rather than concrete working practices currently employed. The more cynical might have even remarked that the clauses were something which some participants paid lip-service to rather than actively pursued.

The professional indemnity (PI) insurance market is currently in the throes of the worst hard market in three decades, and faces further uncertainty due to the consequences of COVID-19 and the recessionary effects the anti-coronavirus measures have prompted.

In this difficult market, exclusions relating to cladding, combustibility and fire safety have become commonplace. The application of these clauses has been going on for some time, with contractors first being affected in the closing months of 2018, architects facing them throughout 2019, and a catch up across all the construction professions in 2019-2020. RICS was forced to abandon its resistance to such exclusions earlier this year, and these clauses were permitted to be applied to RICS member firms’ PI insurance, without it rendering the policy non-compliant with RICS requirements.

At the present time it may well be the case that all of a project team would have such exclusions on their PI insurance, whether they were the contractor, architect, structural engineer, fire engineer or quantity surveyor. As such, the project would not have the safety net of PI insurance in relation to cladding and combustibility issues.

A frequently asked question at the present time is, what are the parties to do in such a situation?

In the absence of other risk transfer solutions, the main thing the parties can do is to make very sure that a mistake in these areas does not occur. This requires a greater degree of checking and collaboration.

In such an environment, project partnering is much less of an ideal and more of a practical necessity.

If that is the approach taken by the project team, clients will also have to recognise the requirements of such approaches. Quality takes time, and programmes will have to acknowledge that.

It may also signal a return to appointments of external checkers such as the Clerk of Works, which have been utilised less often in the past decade. Conceivably this may have a knock on effect on procurement, as tensions have been perceived between such roles and the Design & Build procurement approach.

The PI market has historically been cyclical and there is optimism that we may presently be in the trough of such a cycle. Observations such as these parallel the calls for a Cladding Re in the same way that there is a national provision for such risks as Flooding and Terrorism.

If the PI market is in such a cycle (and it should be noted that the market had been in a soft market for 12+ years and that all professions are being affected and it is not just the Construction sector) then it might be hoped that the future will bring more benign conditions, and that the present blanket exclusions may be mitigated or removed.

There is no indication how long it may be before this is the case however, and therefore practitioners are in the position of having to take risk mitigation steps to protect themselves now.

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James  Burgoyne

James Burgoyne

Director - Claims & Technical

James joined Brunel in 2009 and heads up the Technical and Claims Department. As well as representing Brunel on the ACE PII panel, he writes occasional pieces for us on insurance, risk and associated topics.

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