Sub-contractors are switching to lower levels of professional cover post-delivery, leaving main contractors exposed for large costs if things go wrong.
Professional indemnity insurance is written on a claims-made basis, which means that the policy held by a company at the time a claim is made deals with it – not the policy that was in force at the time the contract was awarded or the project delivered.
Pressure on cashflow, combined with more stringent criteria and higher costs post-Grenfell mean that some sub-contractors have been forced to cut their level of cover.
This is something Paul Stevens, Commercial Director, at commercial aluminium specialist, Acorn Aluminium, warns is leaving some main contractors exposed.
“Insurance companies have increased premiums massively since Grenfell and that has put pressure on some sub-contractors, who have either struggled to qualify for the levels of insurance that they previously had, or to absorb the additional costs”, he explained.
“If something does go wrong and a claim is made against the sub-contractor, their cover could easily fall short, because the claim is made against their existing policy – not the one they had at the time they won or delivered the work.
“The sums we’re talking about on large commercial projects could easily put suppliers under – and that leaves main contractors picking up the bill.”
He added that the liability time frame compounded the problem with a ‘long-stop’ (the maximum period in which a claim can be made), running at up to 15-years.
“Sub-contractors aren’t deliberately misleading main contractors on their levels of professional indemnity insurance. They simply can’t afford it, or since Grenfell and particularly if their work includes cladding, are in many cases, unable to get the levels of insurance that they had”, Paul says.
“The net-effect is, however, that a lot of sub-contractors don’t have a sufficient level of professional indemnity insurance to cover projects, which they may still have a liability for, and as they don’t, costs are going to fall to main contractors.”
Acorn Aluminium is a specialist in the design, manufacture and installation of aluminium curtain walling, windows and doors, working with leading aluminium systems specialists to supply high-performance aluminium glazing systems to the commercial sector.
“We hold professional indemnity cover to £10million for projects up to 12-years after completion”, Paul said. “The cost to us of offering that has increased significantly since Grenfell but we have paid higher premiums because of the scale of projects that we have and continue to work on.
“Not everyone does”, he concluded.