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COVID-19: Construction Delays and Professional Indemnity Insurance

01 April 2020
In the current crisis it is inevitable many if not all current and planned construction projects are going to suffer delays with associated costs/losses.

As the construction industry considers the contractual interpretation of the crisis, particularly force majeure, all parties to construction contracts are reviewing their potential liability and will be undertaking contractual actions to protect, maintain and enable positions.

So what could this mean for professional indemnity insureds, both contractors and consultants? 

Parties incurring losses will question the associated professional advice given. Examples could include:

  • Specification of materials no longer currently available.
  • Selection of an international specialist unable to travel.
  • Supply chain designer with no current capacity to provide timely design information.

Insureds, aware of delays which relate to elements of the project where they have provided professional advice, should now be taking actions for the benefit of both the insured and insurer including:

  • A thorough senior review of all current projects to identify potential issues.
  • Consider the insurance implications of potential liabilities, and prompt notification to Insurers of any claims received.
  • No admissions of liabilities to the client.
  • Information is King. Maintenance and surfacing of all relevant correspondence and evidence. 
  • Instructions from the client to undertake additional services require to be recorded in accordance with the contract to ensure entitlement to the recovery of the associated costs.
  • Instructions to undertake additional works with no guarantee of client reimbursement to be considered from point of view of mitigation. 
  • Where possible promote a practical resolution, agreed to by all parties, giving all parties the best chance of being in a position to resume the project and complete it successfully

Lastly, and of vital importance, insureds should ensure policy renewal is prioritised to maintain continuous cover.

Should you have any queries relating to the content of this article please contact Ian Cooper.

Further Reading

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