Written evidence submitted by Construction Leadership Council [BSB 185]
Information about the Group making the submission
In May 2020 the Construction Leadership Council (CLC) agreed, off the back of success with its Trade Credit Insurance Sub-Group activities, to set up a Professional Indemnity Insurance (PII) sub-group to identify the impact of PII as a barrier to the industry’s recovery from coronavirus and to suggest any government interventions that may be necessary.
A group was formed, consisting of representatives from the businesses and trade associations within the construction industry, insurers, insurance brokers and insurance trade associations, plus representatives from the Ministry of Housing, Communities and Local Government (MHCLG). It became clear that coronavirus was less of an issue than the impact of cladding and the Group agreed the following wider terms of reference:
(i) To discuss and define the nature of the problems relating to the purchase of professional indemnity insurance by construction professionals;
(ii) To explore options that might provide solutions to the problems identified;
(iii) To provide a cohesive plan of action and to communicate this to all relevant parties; and
(iv) To summarise and disseminate the findings of the Group to the relevant parties.
(v) The Group shall seek to encourage attendance and participation from a sensible mix of construction professionals, insurance professionals and government/regulatory organisations.
(vi) The Group shall report to the Construction Leadership Council.
(vii) Until further notice the Group shall aim to meet monthly via video conferencing.
(viii) A summary of discussions/action points from each meeting shall be circulated at least one week before the next meeting.
Representations from the Group
The Group has met three times and has concluded, thus far, as follows:
- Whilst construction professionals are alarmed and worried about the increase in premiums for their PII, more than price, the biggest issue relating to PII for construction professionals is the restrictions on cover. What started off as lower limits of cover for claims involving ACM cladding are now blanket exclusions for any claims directly or indirectly related to fire safety with other exclusions creeping in such as consequential loss. Examples are given in the appendices to the Flaxman Report (which can be provided on request). This means that firms cannot take on work without being uninsured and this work would include the much needed remedial work to replace high risk cladding.
- The members of the group feel that the insurance industry is in paralysis and is not going to relax the restrictions on cover until there is greater certainty around the cost of potential claims already notified and how liability will fall under the new Fire Safety and Building Control regulations.
- The group believes that the government needs to step in to somehow underwrite the fire safety risk, and/or back those responsible for issuing Certificates so that the Certificates can be relied upon by consultants/contractors whose work is being certified, with recourse, for ongoing and future work, including the much needed remedial work to replace high risk cladding.
- Members of the Group believe that the new Fire Safety and Building Control regulations should require a government department sign off/certification that can be relied upon as a defence to any allegations of negligence in meeting building regulations.
- The group appreciates that the legislation seeks to clarify the role and accountability of those involved, including of building inspectors. The effect of certificates, and the liability position, however, are not set out and the group would request that this is clarified by the Government, particularly in relation to liability to third parties for negligent certification. It also requests that a distinction is made between the liability position of building inspectors engaged by a building control authority and those engaged by registered building control approvers (which are effectively private consultants). If building control inspectors do not accept a fair share of liability for their own negligent actions, then the whole risk will fall on other consultants involved, and this increased risk contributes to the PII insurance problems.
- Members of the Group have concerns over the two-stage sign off process proposed under the new Building Control regulations as the party completing the first stage of certification is exposed to any shortcomings in the second stage of certification.
- The Group believes that, without government intervention to take responsibility for the fire safety liabilities and to either be accountable for Building Control sign off, or for the law not to hold those that rely on Building Control sign off (e consultants and contractors) liable for negligent work that has been certified, private companies will be unable to take on these risks because there is inadequate insurance available.
Copies of the minutes of the meetings are available on request.