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Professional Indemnity Insurance Update – August 2026

August 2026

As we head into the second half of 2026, the construction UK professional indemnity (PI) market continues its “soft” market trend seen over the last couple of years. In the first of our construction PI updates, we provide a roundup of recent decisions in the Courts of England & Wales and trends that we may see grow  in the final quarter of 2026.

Building Safety

The impact of the provisions in the Building Safety Act 2022 (the “BSA”) continues to dominate the construction PI market.

The Courts have recently considered many of the key provisions and have made some important decisions which could reshape the risk landscape.

Building Liability Orders

Crest Nicholson v Ardmore [2026] EWHC 789 (TCC)

The decision in Crest Nicholson v Ardmore [2026] EWHC 789 (TCC) is perhaps one of the most significant judicial considerations of the building liability order (“BLO”) regime under sections 130-131 of the BSA to date.

The judgment establishes, for the first time at High Court level, that:

• An anticipatory BLO — i.e. a BLO ordered before any finding of relevant liability — may properly be granted;
• An adjudicator’s decision can give rise to a “relevant liability” for the purposes of section 130;
• A BLO can attach to the binding but interim liability created by adjudication, such that the adjudication enforcement regime and the BSA operate in tandem rather than being mutually exclusive; and
• The court may, under the “specified description” wording in section 130(2), order a BLO in respect of a proportion of a relevant liability where it is “just and equitable” to do so. Here, the Court made a number of important findings in relation to the “just and equitable” wording in the BSA including: (i) a BLO can be made against any associated company, not just against parent companies or SPVs; (ii) BLOs are not limited to cases where a dissolved SPV or shell company is involved — the purpose of section 130 is broader. The Court also found that the claimant’s insurance position should be given little or no weight when considering the just and equitable test.

The practical implications of point (ii) above could be significant. An applicant may use adjudication as a relatively quick way to establish a relevant liability for the purposes of obtaining a BLO. This may circumvent the need for a trial on liability and provides a procedural shortcut for BLO claims. BLO claims may therefore emerge much earlier on in a dispute than would be possible if traditional High Court proceedings had to be followed.

The decision is discussed in further detail here.

Mulalley & Co. Ltd v Sto Ltd & Sto SE & Co. KGaA

A further important decision on BLOs was published recently in Mulalley & Co. Ltd v Sto Ltd & Sto SE & Co. KGaA. This case considered the quantification of a contractor’s contribution claim against the supplier of an external cladding system, via a BLO under section 130 of the BSA. The supplier of the relevant cladding product StoTherm Classic K, Sto Limited, entered administration in January 2025, prompting the contractor Mulalley to pursue a claim against a German parent company Sto SE & Co. KGaA for a BLO. Sto SE & Co failed to defend the proceedings and judgment was entered in default.

This decision is important for a number of reasons:

1. Firstly, the Court determined that the just and equitable contribution payable by Sto, and therefore Sto SE & Co pursuant to the BLO in this case, was 87.5%. In assessing quantum, the Court considered the following criteria:

• what costs were in fact incurred;
• whether those costs were incurred in relation to the pleaded defects;
• whether the costs incurred were reasonable; and
• what is the just and equitable contribution to such loss and damage that Sto SE & Co should be ordered to pay.

2. The Court decided that, in the original proceedings by the developer against the contractor (Martlet v. Mulalley [2022] EWHC 1813 (TCC)), His Honour Judge Davies was right to observe that the courts are “generally reluctant to criticise, with the benefit of hindsight, the reasonableness of the claimant’s expenditure on remedial works.” The Court was, however, willing to consider the relevant expert evidence as to the reasonableness of the remedial costs.

3. The Court assessed that, on the particular development in question, the Sto render accounted for 85.83% of the works required to the external walls and 69.03% of the overall development. The Court was willing to apply these percentages to arrive at a figure for the total remedial costs incurred by reason of the defective Sto system.

4. In considering what is the “just and equitable” contribution to such loss and damage that Sto SE & Co should be ordered to pay, the Court held that the liability findings by virtue of the default judgment necessarily include that:

• Sto failed to supply a cladding product that complied with the functional requirement B4(1) and Regulation 7 of the Building Regulations;
• Sto made misleading statements about the StoTherm Classic system;
• the system was inherently defective; and
• the misleading statements and the inherently defective nature of the StoTherm Classic system were the causes of the apartments being unfit for habitation.

The Court accepted that the principal cause of the remedial works was plainly the fact that Sto “marketed and supplied an inherently defective product”.

5. While the Court considered evidence regarding the contribution of workmanship issues (in respect of the fire barriers) to the requirement for remedial works, it found that “the primary issue with the barriers was that Sto’s standard detail included a layer of combustible insulation over the face of the fire barriers”. As such, the Court determined that the fire barriers would have had to be replaced in any event.

6. While the decision did not concern the liability of an architect, the Court does appear to have accepted the submission made by the contractor Mulalley that a contribution against an architect in respect of a design breach of between 67% and 80% might typically be awarded.

In this decision, the Court made some crucial findings in respect of the StoTherm Classic K product, and although specific to the development in question, there is potential that such findings could apply more widely. The decision demonstrates the crucial factors to be considered by the Courts when assessing the liability of suppliers of non-compliant cladding products and ordering BLOs. It also provides further indication of the approach of the Courts to assessment of quantum of remedial works and related costs.

Remediation Contribution Orders

There have been a number of important decisions relating to Remediation Contribution Orders (“RCOs”).

Edgewater (Stevenage) Limited and Others v Grey GR Limited Partnership [2026] UKUT 18 (LC)

Here, the Upper Tribunal (Lands Chamber) handed down a decision which considered the scope and application of several of the criteria for the making of an RCO under section 124 of the BSA including: (i) whether RCOs can be made that make multiple respondents jointly and severally liable for the same sum of money; (ii) the correct approach to applying the “just and equitable” test; (iii) the threshold for what constitutes a “building safety risk”; and (iv) the approach to allegations that a remedial scheme is unnecessarily costly in the context of RCOs.

It was held that:

• The FTT does have the power to make joint and several RCOs where it is just and equitable to do so;
• The “just and equitable” test does not require there to have been participation in the development or financial gain from it;
• The term “building safety risk” does not require any particular level or threshold of risk to be met. Any risk would be sufficient; and
• A reasonable remedial scheme does not necessarily mean the minimum that is technically necessary. The relevant claimants will be allowed a certain degree of flexibility in whether or not a remedial scheme is reasonable.

Our recent article discusses the case in further detail.

Secretary of State for Housing, Communities and Local Government v EDR Builders (1) Hollybrook (UK) Limited (2) LON/00BB/BSB/2024/0011

Here, the key issue to be considered was whether the sum sought for remedial works was recoverable/should be ordered at all, and/or whether it should be reduced to reflect the cheaper remedial scheme that could have been carried out.

It was held that:

• The relevant test is whether the works were “reasonable”, in particular, whether the remediation carried out was within “the band of reasonable responses” to the relevant defects, and if it was, “the fact that it could have been done more cheaply is not of itself a basis for reducing the amount of an RCO”; and
• When considering whether costs are incurred in remedying relevant defects, unless the works in question can properly be demonstrated as unreasonable, it does not matter for the purposes of section 124 whether an alternative scheme might have satisfactorily addressed the fire safety risk at a lower cost.

The FTT found that the remedial works carried out on the relevant property were within the range of reasonable responses to the relevant defects.

We discuss some of the wider points relating to this case here.

These recent decisions concerning RCOs potentially widen the scope and application of several of the criteria for the making of an RCO. Furthermore, the decisions indicate that the Courts are less inclined to support arguments made regarding cheaper alternative remedial scheme. Such an approach could impact quantum significantly.

Durkan Estates Ltd v Wallace Estates Ltd [2026] EWHC 2003 (TCC)

In Durkan Estates Ltd v Wallace Estates Ltd [2026] EWHC 2003 (TCC), the Technology and Construction Court refused Wallace Estates’ application for reverse summary judgment, which was based on allegations that delays to building safety remediation works amounted to repudiatory or anticipatory breach, entitling Wallace to terminate a remediation agreement with Durkan. The Court found that the dispute raised a number of fact-sensitive issues, including causation, responsibility for delay, waiver, affirmation, estoppel and the effect of regulatory requirements such as Gateway 2 approval by the Building Safety Regulator, making the matter unsuitable for summary determination.

The decision is a reminder that, even against the backdrop of statutory remediation obligations under the Building Safety Act 2022, delay will not necessarily constitute a repudiatory breach justifying termination.

For construction PI insurers, the judgment suggests that courts may be reluctant to dispose of BSA-related remediation disputes at an early stage where there are contested issues surrounding project delays, regulatory approvals, programme responsibility and the parties’ conduct. As a result, insurers may face increasingly fact-heavy, costly and protracted disputes arising from building safety remediation projects, with particular scrutiny of delay attribution, approval processes, waiver and affirmation arguments, and the interaction between contractual remediation arrangements and statutory remedies under the BSA.

From a claims handling and reserving perspective, the case highlights the importance of conducting a detailed investigation into project chronology, stakeholder communications and regulatory processes before reaching firm conclusions on liability or recovery prospects.

Artificial Intelligence

The potential for professional negligence claims involving construction professionals regarding the use of Artificial Intelligence (“AI”) continues to grow.

The recent High Court decision in Cork v Smith (or Cork & Anor v Mark Smith) [2026] EWHC 1199 (Ch) illustrates the risks of professional negligence claims involving the use of AI. While this case did not involve construction professionals (it involved the use of AI by law firms) the judge provided clarity as to the standards which must be adhered to by professionals: “professionals bear ultimate responsibility for their work and cannot outsource the process of legal research or of [legal] reasoning to an AI.”

In the construction industry, the Royal Institution of Chartered Surveyors (RICS) has published its first mandatory global professional standards on the responsible use of AI in surveying practice. The standards (as effective from 9 March 2026) require the following:

• Members who use AI systems to deliver surveying services must develop and maintain sufficient knowledge to support responsible use;
• Before using an AI system, members must carry out and record in writing an assessment of whether AI is the most appropriate tool;
• Firms must also maintain a written register of AI systems used, including the purpose, date of first use, and the date for next review;
• A written decision must be prepared by, or under the supervision of, an appropriately qualified and named surveyor, about the reliability of the output of any AI system;
• Members must make clear to clients, in writing and in advance, when and for what purpose AI is to be used. Certain levels of detail must be included in service agreements.

The standards have important considerations for professional indemnity insurers who may insure surveyors that are subject to these new rules. Where surveyors rely on AI outputs without complying with the standards, they may be found professionally negligent.

It will be important that insurers and professionals give consideration to potential coverage issues as AI becomes more widely used in the industry. The reliance on AI may raise into question whether certain services provided (which become relevant to a claim) still amount to the provision of professional services in the ordinary sense and therefore is covered under a PI policy. It will be necessary to ensure that policy wordings identify and address any AI-specific exclusions or possible coverage gaps. It may also be necessary for policies to contain exclusions relating to unsupervised or unmanaged AI use.

Data Centres

Driven largely by demand for AI and data-intensive digital services, data centre projects are growing.

Data centres involve complex design, construction, installation and operation, exposing construction professionals involved in these stages to certain risks.

The potential issues are vast, driven by the urgency to design and construct new data centres. Some common issues include:

• The potential for corner-cutting when contractual agreements and scope of services are being negotiated resulting in overlooked liability caps, exclusions for consequential/indirect losses, net contribution clauses and reasonable performance requirements (which do not go further than the duty to exercise reasonable skill and care);
• Delay claims arising from design issues or unforeseen issues during the construction programme;
• Fires resulting from open flames during construction, electrical faults, HVAC failures and inadequate maintenance;
• Targeted cyber-attacks which digitally and physically compromise servers; and
• Environmental risks due to electricity and water requirements.

While data centre projects represent a significant opportunity for construction professionals both domestically and internationally, they present a number of risks. Insurance cover that extends to data centre projects should be adequately managed to ensure that appropriate measures are in place to address the potential problems that may arise.

We discuss here how data centres are impacting the insurance market generally.

Transfer Slabs

Structural safety concerns relating to reinforced concrete buildings incorporating transfer slabs have emerged as a significant area of potential professional indemnity exposure for construction professionals and their insurers.

A transfer slab is a heavily reinforced concrete structural element designed to redistribute building loads where upper-floor columns do not align with supporting columns or walls below. Widely used in residential and mixed-use developments, particularly from the early 2000s onwards, transfer slabs enable greater flexibility in building design but can present complex structural challenges.

Of particular concern is the risk of punching shear, a failure mechanism whereby concentrated loads from a column cause a localised failure through the slab. In severe cases, such failures could result in partial or progressive collapse of a building. Where deficiencies are identified in the design, specification, construction or subsequent assessment of transfer slabs, substantial liabilities may arise for those involved in the delivery of the works. The financial consequences can be significant, including investigation costs, remediation liabilities, diminution in value claims, and potentially claims arising from structural failure.

The scale of the potential exposure remains uncertain, and it is not yet clear how many buildings may be affected. However, a combination of regulatory scrutiny, evolving industry guidance and emerging legal developments suggests that transfer slabs represent a growing area of risk for the construction sector and its professional indemnity insurers. There are indications that the issue may be widespread, while recent decisions demonstrate a willingness by courts and tribunals to adopt a robust approach to remediation under the Building Safety Act 2022.

Key developments include:

1. The issuance of warnings by both the Building Safety Regulator (December 2025) and RICS (March 2026) highlighting potential concerns associated with transfer slab construction.
2. The publication by IStructE in July 2026 of a new Q&A document and accompanying guidance, Design and Assessment of Reinforced Concrete Transfer Slabs, which provides an interim framework for the assessment of existing buildings pending the publication of dedicated assessment guidance anticipated in 2027.
3. A notable decision in Wotton Court, a 12-storey residential development in Poplar, London, where the First-tier Tribunal granted a remediation order in December 2025 requiring investigations and urgent remedial works in relation to alleged transfer slab defects.

From an insurance perspective, the most significant aspect of the July 2026 IStructE guidance is its emphasis on the assessment of existing buildings. Whereas earlier guidance published in November 2024 focused principally on the design of new transfer slabs, the latest publication recognises the industry’s immediate challenge to be the identification, assessment and management of risks associated with transfer slabs already in service.

Given the prevalence of transfer slabs in residential and mixed-use developments completed over the last two decades, particularly within higher-risk buildings, increased scrutiny under the Building Safety Act 2022 is likely to drive further structural reviews and investigations. These reviews may, in turn, uncover design or construction deficiencies, leading to remediation programmes and associated professional negligence claims.

While it remains too early to assess the ultimate volume or value of claims arising from transfer slab investigations, the combination of heightened regulatory focus, evolving technical standards and increasing remediation activity suggests that this is an emerging area of loss exposure. Construction professional indemnity insurers should therefore be alert to the potential for notifications and claims relating to historic projects involving transfer slab design, assessment and construction, as well as the adequacy of insureds’ risk management and quality assurance processes in this area.

Climate Change: Wildfires as a Growing Concern for Construction PI Insurers

As we have seen this summer, rising temperatures are increasing the frequency and severity of wildfires across Europe. While the most immediate impact likely falls on property and catastrophe insurers, professional indemnity insurers should also be alert to the potential for increased liability exposures.

For professional indemnity insurers, the potential for claims arising from alleged failures in professional advice, risk assessment, planning and design should be noted. As climate-related risks become more foreseeable, professionals may face greater scrutiny over the decisions they make and the advice they provide around.

Climate-related claims also present challenges from a claims handling perspective. Construction disputes are often highly technical, expert-driven and document-intensive, leading to prolonged litigation and significant defence costs. In addition, a single wildfire event could generate multiple claims against different professionals involved in the same project or geographic area, making loss exposures more difficult to predict and manage.

As Europe’s climate continues to warm and wildfire activity increases, construction PI insurers are likely to experience greater underwriting scrutiny, higher defence costs and a gradual rise in climate-related claims activity.  Alleged failures in advice, design and risk management are likely to become an increasingly important consideration for construction professional indemnity insurance portfolios.

Conclusion

The themes emerging during 2026 so far highlight an increasingly challenging and complex risk landscape for construction professional indemnity insurers. The continued evolution of the Building Safety Act 2022, the growing use of artificial intelligence by construction professionals, the rapid expansion of data centre projects, emerging concerns surrounding transfer slab construction, and the increasing impact of climate-related risks all point towards a future in which both the frequency and severity of claims may rise.

Against this backdrop, careful policy wording review and claims management remain as important as ever. Insurers should continue to monitor legal, regulatory and technical developments closely, whilst engaging with insureds to understand how emerging risks are being managed in practice.

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