PROFESSIONAL (ERRORS & OMISSIONS) INDEMNITY INSURANCE
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 (and any compensation awarded to the other party) if you’re held responsible for a mistake in your professional service. The mistake could have been made by a subcontractor or other professional working on the project, but you’re dragged into the dispute and held liable alongside them.
Currently, insurers are limiting the cover construction industry professionals to certain trades and activities. It is mostly suitable for:
Building contractors and construction project managers
For these occupations it covers:
- Liability to the project owner/principal for additional costs if a design cannot be built as per the plans supplied (known as “buildability”)
- Liability that attaches to you from errors made by architects/architectural designers, land surveyors and quantity surveyors on a particular build
Electricians, plumbers, drainlayers, gasfitters and HVAC installers
For these occupations it covers these activities:
- Liability for certification, specification and design services
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)
- Claims associated with the supply of goods
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