PROFESSIONAL (ERRORS & OMISSIONS) INDEMNITY
Under the Building Act builders have a “duty of care” to build something that is “fit for purpose”. This duty of care applies to all trade professionals as it is also an established principle in cases of negligence.
A duty of care can be owed by:
- a trade professional to their client
- a builder to subsequent purchasers of the property
- sub-contractors to the principal or owner, and subsequent owners
Increasing numbers of cases are being brought against builders and tradespeople claiming they failed to meet their duty of care to their clients.
Public liability insurance only covers claims for accidental damage to property (or loss of use of undamaged property). It does not cover you if the claim relates to an act or mistake where the other party suffers only a financial loss.
Professional indemnity insurance will pay your legal bills if you’re held responsible for a mistake in your professional service. The mistake could have been made by a subcontractor or someone else working on your behalf, but you’re held liable for their actions.
FOUNDATION LAID TOO CLOSE TO BOUNDARY
A builder in Wellington subcontracted foundation work to another firm, which laid the slab in the wrong place on the property, meaning it was too close to the boundary. This was not picked up until after the final inspection and the builder was held liable for the cost of rectifying the problem. The cost of fixing this error came to $40,000, which the builder was held liable for.
COUNCIL INSPECTIONS NOT ARRANGED
A builder was contracted to perform earthquake remediation, a reclad and re-roof to a Christchurch home. The builder failed to arrange all the inspections required and the Council subsequently refused to grant a CCC. An independent assessment required both cladding and roof material to be removed as part of the inspection, and multiple failings were identified that the builder was held liable for. The cost of the inspection and remediation work in order to obtain a CCC amounted to over $20,000.
JOINERY INCORRECTLY MEASURED
A builder in Auckland subcontracted the installation of joinery. Unfortunately, the subcontractor didn’t measure it correctly or follow the manufacturer’s installation guide. This was picked up shortly after the CCC was issued and in the subsequent legal action involving the Council, the builder and subcontractor, the builder was found significantly responsible and ordered to pay a large share of the overall damages, in addition to his hefty legal bill.
HOW MUCH DOES IT COST?
The cost of being held liable for a mistake that results in someone being out of pocket could easily run into thousands of dollars in legal bills and damages. Compared to this, Professional Indemnity premiums are an essential investment in managing your risk. Request a quote today to see how much your own cover could cost.
POLICY KEY FACTS
This is meant as a summary of the most important items of the policy. For a complete understanding of what it does and doesn’t cover you should always read the full policy wording.
- What you’re legally liable to pay if you or someone employed by you makes a mistake resulting in a financial loss for someone else
- Payment of associated costs and expenses such as legal fees
- Costs incurred by you through mistakes made by your subcontractors and consultants on a job
- The cost of defending complaints made to the LBP Board (or other disciplinary boards)
Because your liability extends for 10 years under the Building Act, cover is available even after you stop trading or retire. This is known as “run off cover”.
WHAT'S NOT COVERED
- Your liability for damage to actual property (for this you need public liability insurance)
- Claims associated with the failure of a product to meet its manufacturer’s specifications (this should be the manufacturer’s liability)
OTHER THINGS YOU SHOULD KNOW
- An excess of $5,000 is payable for each claim
- The policy is a “claims made” one. This means cover must be in place when the event occurred (eg. when you built the house) and then continuously until you are first advised of a problem and contact us to make a claim