Assessing the impact of the Grenfell Tower tragedy on professional indemnity insurance
Survey for members
We have been asked by Ministry of Housing, Communities and Local Government (MHCLG) Industry Response Group (IRG) via the Construction Industry Council (CIC), of which CIAT is a full member, to respond to a second survey on the impact of professional indemnity insurance and the Grenfell Tower tragedy. The questionnaire asks a series of straightforward questions for your response.
In response to the survey issue, CIAT has written directly to the MHCLG and CIC as from our understanding some insurers are acting in an opportunistic manner, i.e. by trying to increase premiums, whilst at the same time looking to restrict cover.
Seeking to concentrate only on 'Cladding' exposures, the insurance market is seeking avoid it and in the majority of cases fully exclude cover.
A small number of insurers are prepared to offer some cover, perhaps full cover, but that is now few and far between. The restricted cover on offer is either to limit to 'Rectification' only or insist upon 'Compliance with Regulation', which for a competent professional would be expected which, is virtually impossible and leaves the insured open to legal challenge.
The potential is that some practices are simply without adequate cover, which not only would leave them and their clients exposed, but would also make them in breach of codes of professional conduct and possible contract terms.
There are some excellent firms that are having to accept any measure of cover they can get irrespective of cost. Cost is nearly irrelevant when the potential uninsured risks are analysed and quantified.
From an insurer's perspective, renewing with exclusions on these 'Claims Made' wordings is effectively passing the risks back to the professional.
What makes this worse is that some clients will elect to renew with total 'Cladding' exclusions when limited cover was available, simply to save an insignificant amount of premium, thus bringing down upon themselves potential financial disaster.
Whilst this legacy risk is a major problem, firms with exclusions or limitations on their policies are still undertaking 'Cladding' work, knowing the risk.
It is also important to note that most insurers do not even recognise an 18m cut off point, they are applying from ground up.
We have asked that the MHCLG and CIC focus should be to clarify how exposed the professions really are, to put some perspective on the consideration that needs to be taken in respect of policy wording and costs about how exposed the profession really is, and to engage directly with the brokers and underwriters.
If you wish to complete the survey, please visit www.cic.org.uk/survey.php if you completed the earlier version, as new questions have been added to enable us to get a more detailed picture.
All responses are anonymous.