‘Shameful’ Personal Indemnity Insurance Fire Carve-Outs Leave Industry Exposed

‘Shameful’ removal of fire safety from professional indemnity insurance leaves building owners uninsured in Grenfell aftermath, consultants warn.

CONSTRUCTION EXPERTS have raised concerns over fire risks being increasingly excluded from professional indemnity (PI) insurance policies following the Grenfell Tower inquiry.

The rising trend leaves building owners such as schools, hospitals and businesses at risk of being uninsured.

Consultants and professionals in the construction industry take out PI insurance to cover the cost of negligence claims. These claims could be made against professionals by clients if an incident such as a building fire was alleged to be caused by an error in design or a failure in specification.

Fire Carve-Outs

The Grenfell Tower fire inquiry has caused many underwriters to leave the PI insurance market due to higher risks, such as cladding. As a result, insurers are hiking up premiums or reducing the amount of cover provided.

‘Fire carve-outs’ are a growing phenomenon, giving reduced cover. PI policy proposals are increasingly stating the underwriter will not pay out for any negligence claims connected to the fire safety or fire performance of a building. This applies retrospectively and to future claims.

Property and construction consultancy, Ingleton Wood, is calling on the government to take urgent action. They are asking for the underwriting of policies to ensure all consultancies are comprehensively insured, including for fire-related inspections and designs.

David Cresswell, partner at Ingleton Wood, said: “We are very concerned about the rising prevalence of fire safety exclusions in professional indemnity policies.

“Fire carve-outs are shameful documents and essentially mean consultants would be uninsured for any passive or active fire issues, retrospectively as well as in the future.”

Applying building safety regulations

The increasing cost of PI insurance and reluctance of providers to cover fire risks means that many consultants are being forced to take reduced insurance cover. The hike in PI insurance premiums means they simply cannot afford the full cover. The situation means consultants and inspectors are disincentivised to provide their regulatory services, creating a potentially damaging position for the industry with wider ramifications for building owners and occupiers.

David Cresswell continues, “The built environment relies on competent consultants to apply the regulations in order to safeguard us all. It is therefore time for the government to step in with greater regulation or, even better, to underwrite the insurance itself. We are also lobbying local MPs, industry regulators and other stakeholders to help tackle this very serious issue.”

The Royal Institute of British Architects (RIBA) has acknowledged PI cover is “becoming more and more challenging” and has pledged to help the industry tackle the issue.