ARB PII update

A week ago was the fifth anniversary of the Grenfell Tower tragedy, a reminder for all in the construction industry of how important safety is to the design and build of a development. There has been significant reform in legislation to better govern building safety. Along with these changes, professional indemnity insurers are also reassessing the risks, resulting in a hardening market that is shifting greater liability on professionals.

Under the Architect Code of Conduct Standard 8, which forms part of the registration process with ARB, architects are required to demonstrate that they have and will maintain adequate and appropriate professional insurance cover at a minimum level. The current recommended minimum limit of indemnity is £250,000 for each and every claim, however this figure depends on whether the level of cover is sufficient to meet any claims arising from professional negligence and will differ from architect to architect.

With the insurance market hardening in recent years and insurers restricting insurable risks, some architects are unable to obtain cover to meet the requirements of Standard 8 and are being left in a difficult position. In response to the changing insurance market, ARB are reviewing the PII guidance and have opened their proposed revisions for public consultation on 16 May and will close on 4^th July.

Some key changes proposed by the ARB include:

• Commonly known risks which are subject to aggregate limits, such as claims in relation to fire safety and cladding, are being recognised as acceptable cover.
• The shift in the insurance market now see many insurers limiting claims to direct loss only, and cover subject to such limit will be considered adequate for the purpose of meeting the Code.
• Inability to obtain cover for retrospective liabilities due to challenging market conditions will not be considered as misconduct.
• With liability period being extended to 30 years for specific claims which qualify, requirement to maintain run-off cover for completed projects for longer than the current six year period seems disproportionate.

In response to ARB’s review on professional indemnity insurance, the RIBA has established a working group and released their latest response to the consultation here. As RIBA President, Simon Allford, mentioned in his memo to members last week, “While revisions are critical to enable us to move forward as an industry, we must get it right, or else we risk forcing smaller practices into closure or moving to the unregulated sector.”.

Given the very challenging insurance market this is an important step towards ensuring that architects do not fall foul of the ARB rules as a result of unavoidable limitations of cover.  However, we agree that the changes proposed feel limited in scope.  Perhaps a general qualification that compliance with the insurance requirements of the ARB rules is subject to the availability of the insurance at commercially reasonable rates would be more appropriate.

This is a very important consultation which is open until 4^th July. Make sure to have your say by responding to the consultation here.