PII Guidance. This leaflets sets out guidance for architects in connection with their professional indemnity insurance. Guidance and Information
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1 Architects Registration Board Guidance and Information PII Guidance This leaflets sets out guidance for architects in connection with their professional indemnity insurance. 8 Weymouth Street London W1W 5BU Telephone Facsimile info@arb.org.uk
2 PII Guidance Protection against liability incurred in practice or business related to architecture needs to be in place in the interests of both client and architect. Allegations of professional negligence often involve complex and detailed issues, and litigation may be expensive and traumatic. Professional Indemnity Insurance (PII) or other appropriate insurance cover is essential to protect an architect against claims. An architect should always seek advice from an appropriate expert adviser in relation to the insurance cover he or she obtains including, for example, any exclusions from cover and the limit of indemnity. The following information is for general guidance only and may not be relied upon in place of professional advice. The Board does not accept any duty to advise on the appropriate terms of cover required in specific cases. 1
3 PII Guidance Guidance Standard 8 of the Architects Code Standards of Conduct and Practice provides that: Architects should not undertake professional work without adequate and appropriate professional indemnity insurance cover. Architects who undertake professional work, whether through a partnership or company or as a sole trader, as an employee or in a private capacity, should ensure their work is covered by insurance. Employees are clearly a special category as insurance will usually be provided by their employer. Nonetheless, employed architects should ensure that appropriate cover/protection is provided by their employer, and in the case of doubt, seek such confirmation in writing. It is an architect s responsibility to ensure their professional work is adequately covered. The Board is also aware that in certain instances, architects may be reliant on others to provide cover/protection on their behalf. Examples of this are those acting as consultants, through agencies, or providing casual or gratuitous advice. Architects may not need to maintain their own policy where other appropriate cover/protection is provided on their behalf, but again should seek confirmation of that cover in writing. Consideration needs to be given to the issues surrounding pro bono work. Work carried out for free is unlikely to be free of liability. It is not uncommon for claims to be made against architects for pro bono work and suitable protection will be required, as for other categories of work. All architects should understand the importance of notifying their insurance brokers or insurers of any incidents or potential claims. Failure to adhere to the claims notification requirements of a policy may leave an architect s cover void when they come to make a claim. 2
4 Architects need to be aware that the terms and conditions of PII policies differ, and it is therefore necessary that architects make proper enquiry to satisfy themselves that the policy on offer matches all their requirements. Consideration should be given to the implications of the date the practice first commenced work and the start date of cover. Brokers should be chosen who are able to demonstrate specialist knowledge of the profession. Limits of indemnity need to be carefully selected, and levels of excess should not be so high as to prejudice the financial stability of the practice. Cover for legal costs is increasingly important, and some insurers are also prepared to cover some of the costs of attending a disciplinary hearing. Attention should be paid to the insurer s attitude to alternative dispute resolution, especially to adjudication. It is also appropriate to question the insurer s approach to claims handling and their track record of meeting claims efficiently and fairly. The Board, acting through its Professional Conduct Committee, will view very seriously any failure by an architect to maintain adequate and appropriate professional indemnity insurance. Whilst the circumstances of each case will be different, it should be noted that the Professional Conduct Committee has found persons without such cover to be guilty of unacceptable professional conduct as defined by the Architects Act Working Overseas Architects should ensure that any work they undertake overseas is adequately covered by their policy. They should also consult with their broker as to under which country s laws any claim might arise. 3
5 PII Guidance Limit of Indemnity The Board recommends that the minimum limit of indemnity provided by PII should be 250,000 for each and every claim. It is important to note that architects should maintain sufficient cover to enable them to meet claims arising from professional practice and bear in mind that claims may arise from personal injury as well as loss, damage, delay and additional costs. Even those Architects with limited turnover or engaged in private works (outside of their main employment) need to maintain a minimum level of cover, and professionals should be wary of the problems any restrictions of cover may cause. Run-Off Cover The nature of professional indemnity insurance means that cover is provided on a claims-made basis; in order for cover to be provided insurance must be held when a claim is made, rather than when an incident occurred. This is why it is important that professionals ensure that they purchase run-off cover when they cease practice, to cover themselves for work previously undertaken. The Board recommends that, in line with the Limitation Act 1980, architects ensure that they acquire a minimum of six years worth of run-off cover, and continue to monitor any risk they have of a claim being made against them after this time. This cover should be held at the same amount as its highest level in the three years prior to the cessation of practice. There are a number of ways insurance run-off cover can be purchased, which may include buying a policy in advance to cover six years for an upfront lump sum. Advice should be sought from an insurance broker or insurer as to the most appropriate way to buy such cover. 4
6 Architects Registration Board Contact us Prescription Queries Registration Queries Regulation Queries Communications 8 Weymouth Street London W1W 5BU Telephone Facsimile
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