BJP Insurance Brokers Ltd: Defects and Damage in the Construction Industry
Although not mutually exclusive, the difference between defects and damage in construction work is important to recognise. It can however be difficult to distinguish on some construction claims. Because of this, it’s certainly worth understanding the challenges this distinction can bring, as well as how they can be overcome.
Whether a problem is the result of design, plan, specification, materials or standard of workmanship, defects can cause damage to project assets such as heavy machinery, which in itself can introduce some very expensive unforeseen costs.
While material damage cover that you would find under a Contractors’ All Risks (CAR) policy will protect a project’s physical assets against this unexpected damage, it is not designed to guarantee the quality of your work by covering losses which are the result of defects. Issues which are caused by ‘pure’ defects are first and foremost a contractual issue, or something to be addressed by the responsible party’s professional indemnity insurer. However, where defects have caused damage, a CAR policy then comes into play, and the cover available will be articulated in the exclusions in the wording.
Knowing the difference between defects and damage is therefore important for knowing whether, and to what extent, there is recourse under a material damage cover and what is within the remit of professional indemnity cover. However, the dividing line between these concepts is not so easy to distinguish in practice and often presents complex challenges on construction claims that involve defects.
What is professional indemnity insurance?
As mentioned, defects are more appropriately dealt with in the realm of professional indemnity insurance. This type of insurance is vital if you plan to provide advice, designs or a service to external clients – anywhere you’re at risk of being held accountable for damage or injury to a third party because of your business activities. In fact, many business sectors require PI insurance as standard by their regulators to enable them to practice in the first place. These include accountancy firms, law firms and engineering and surveying firms to name but a few. Anyone who works on a contract basis – like management and business consultants and IT contractors – will almost certainly need PI insurance before a job can be awarded. Should a claim be brought against you for poor or faulty advice, design or specification, professional indemnity insurance would indemnify you in respect of legal costs and expenses and the costs of correcting the errors.
It’s key to remember that regardless of how much experience your firm may have, there’s always a chance that you or a member of your team could make a mistake. Professional indemnity insurance will protect you against a variety of issues, including:
Professional negligence (making a mistake in a piece of work for a third party)
Loss of documents or data
Unintentional breach of copyright and/or confidentiality
Defamation and libel
Loss of goods or money
The vast majority of firms spend time nurturing positive relationships with their clients, but a mistake in a piece of work can sour relations very quickly. Unfortunately, if a client does end up significantly out of pocket as the result of your negligence, there’s a high chance they will seek compensation.
How BJP Insurance Brokers can help
In order to insure yourself properly against damage, defects and other liabilities, it’s vital you understand your business’s individual needs and have adequate cover in place. This in itself can be daunting, but thanks to BJP’s years of experience we can help build the bespoke cover you need. Contact us today on 0345 365 2121 and speak to one of our expert team.