How Professional Indemnity Insurance Protects Against Design Issues: A Guide for Developers
The business of developing land or buildings to add value and create habitable and usable spaces is hugely rewarding and often very lucrative. However, it doesn’t come without responsibility and risk.
Developers take out professional indemnity insurance to protect themselves from a range of risks that they’re commonly exposed to. Professional indemnity insurance (also known as PI insurance) protects developers when certain issues arise, either during the development or after it is complete.
But how can PI insurance help protect developers against claims involving issues with the design of a project? Here, we explore this specific issue in more depth, looking at the benefits of taking out PI insurance to reduce design-specific risks.
How Can Design Flaws Arise During Development?
Flaws in the design stage of a property development can occur for several reasons:
Miscommunication
Poor communications or coordination between the various parties involved in a project, such as architects, developers, contractors and engineers, can cause problems. For example, if details aren’t specific enough or inconsistencies occur, details can slip through the net or outdated versions of a plan might be used.
Miscalculations or Omissions
Property development is a detail-driven industry, and developments are more complex than ever. A simple miscalculation or omission from a plan or instructions can lead to designs that fail to work in practice.
Insufficient Environmental or Site Considerations
Site conditions and building codes are complex and need to be taken into account at the design stage. Failing to do this might lead to issues with building foundations or compliance, for example.
How Can PI Insurance Protect Developers?
A single design flaw can trigger a domino effect leading to further issues and claims relating to problems like construction delays, increased costs, safety hazards, legal disputes, unhappy buyers, and reputational damage.
The stakes are especially high in large developments where losses can reach into the millions. All stakeholders have an interest in ensuring design quality and addressing issues swiftly when they arise. Taking out adequate professional indemnity cover is one way a developer can play their part in protecting themselves and their projects.
Property developers are all too aware of the risks they are exposed to. Even the smallest oversight, misstep or omission can have hugely expensive and damaging financial consequences. Taking out PI insurance is essential, but developers also need to make sure they’re comprehensively covered.
When looking around for the right professional indemnity policy, developers should take into account project-specific factors like their level of risk, the size of the project and the details of the contract. Making sure that the PI policy covers each and every risk, and to an adequate level, will provide the best protection when something goes wrong.
In an industry where risk is unavoidable, professional indemnity insurance is a powerful tool that ensures developers can continue building with confidence, knowing they’re protected against costly claims.