I was just wondering if there is a standard way to calculate how much Professional Indemnity insurance my subcontractors would need to have in place- especially when they are not providing a professional service, but are carrying out physical works.
For example, a decorator who is carrying out a contract for £500k in one year, I cannot imagine that their policy would need to exceed the total value of work, as in this risk of a claim on the PI insurance would be low- maybe for breach of contract or something?
Any advise on this would be appreciated.
P.S. Our client, has instructed that we the contractor need PI insurance, but have not specified how much.
You only need PI if you are carrying out design services as part of your obligations under your sub-contract. A decorator would not need to supply any.
If you are doing design then you need to obtain some insurance and the value of that would possibly depend on the contract value, the turnover of your business and other factors that would be relevant. Remember that the higher the level the higher your premium and that PI is not cheap.
Thank you for your reply. So for instance if we asked an electrical contractor to rewire a full building, but we did not provide them with a design- and they done it of their own back, would this class as them designing the installation- or not?
Also, does PI insurance not cover things like breach of contract, confidentiality etc, which a company who were not responsible for design could all fall foul too?
if they have designed the system then they should provide PI at least to the vale of the works. PI does not cover defective works that are not caused by design failure and other breaches of the contract. It’s solely for design and so you may want to see their public liability insurance as well. Who is responsible for insuring the works on your project?
Thank you- that answers my question. So PI is only needed when the contractor or subcontractor designs part or all of the works, and which may end up defective because of design failure.
The client has asked us to get PI insurance, probably because on a project that I have nothing to do with- there is design works, but all mine are general repair/maintenance works.