#WiseUpWednesday: Don’t Void Your P.I. Cover…
This week’s Wise Up Wednesday is about putting your company at risk by voiding your P.I. cover.
“Reasonable skill and care”
The law provides that in the absence of any written terms and conditions to the contrary, a professional designer will have a duty to act with reasonable skill and care. And a professional person is not negligent if he carries out his work to the same standard that another reasonably competent member of his profession would have met.
A designer’s duty does not necessarily require him to achieve a particular result as long as he has exercised the requisite level of care.
For example, surgeons cannot guarantee their patients will survive.
“Fitness for purpose”
The term “Fitness for Purpose” pretty much means what it says on the tin.
It means that, when completed, the works will be fit for their intended use. This is a high standard, because it effectively amounts to guaranteeing the outcome.
If for any reason your part of the building turns out not to be fit for its intended purpose, for whatever reason, then on the face of it you’re liable – there’s no need to prove that you were in breach of the contractual standard of care, or even that there’s some fault in your design.
If it doesn’t do what it was supposed to do, then you are on the hook.
And it does NOT matter what you knew or what you were told about what the building user/owner wanted.
It’s a strange concept to get your head around, but as an example from an actual case; if you were designing the concrete floor in a warehouse, would you expect the fork lift trucks to have steel (rather than rubber) wheels?
No I thought not – and neither did the designer who was held liable for the floor’s failure…
Why does it matter?
The reason why the distinction between these two levels of responsibility is so contentious is because most professional indemnity (“PI”) policies will cover you only in the event of a claim arising out of your professional negligence (i.e. a failure to exercise reasonable skill and care).
This leaves you the designer uninsured against a contractual claim for breach of a fitness for purpose obligation.
Your policy is unlikely to respond to the claim and insurers may refuse to pay costs associated with the defence of the claim.
Further, not only do PI policies generally expressly exclude a fitness for purpose risk (since it is difficult to quantify this risk in respect of both probability of occurrence and magnitude of loss), some may even be completely invalidated.
The Silent Assassin
The very words “fitness for purpose” will understandably trigger alarm bells in the ears of many Specialist Contractors.
However, what many DO NOT KNOW is that where the contract is silent on the matter (i.e. there is no express limitation to reasonable skill and care) a fitness for purpose obligation will be implied.
And it happens all the time, because Specialist Contractors often work on the basis of the flimsiest of contractual arrangements and documentation, which do not say anything about design – even though YOU ARE designing.
Don’t Rely On Your Broker
Unfortunately, in the immortal words of Sir Michael Caine (albeit he said it came from Peter Sellars), when it comes to design liability;
“Not a lot of people know that…”
And as one of my Clients recently found out, asking his insurance broker wasn’t particularly helpful, because they gave him defective information that put him at risk.
I hope you enjoyed my Wise Up Wednesday and that it gave you some food for thought.
In the meantime if you need any help with any of your business problems, including design liability, please don’t hesitate to pick up the phone and give us a call on 01773 712116.