Building Safety: IUA publishes new professional indemnity insurance clause

Following the tragic Grenfell Tower fire in 2017 the professional indemnity ("PI") insurance market for fire safety design services has contracted significantly, with a number of underwriters withdrawing from the market completely or otherwise imposing onerous exclusions and/or limitations on their PI insurance cover. As a consequence organisations undertaking fire safety design services have struggled to obtain the necessary PI insurance which has hampered efforts to remediate unsafe cladding on high rise residential buildings.

In an attempt to improve the situation, and speed up building cladding remediation work, the International Underwriting Association ("IUA"), in collaboration with the Department for Levelling Up, Housing and Communities, has published a new model insurance clause covering fire safety risks for inclusion in PI insurance policies (see here). 

It is hoped that the use of the new IUA model clause will encourage underwriters to re-engage with the market and provide PI insurance for building cladding remediation work. 

Burges Salmon comment

While any attempt to improve the speed of delivery of building safety works is welcome, it is worth noting that the new IUA model clause :

• Is only applicable to building safety works funded by the Building Safety Fund. Such works are limited to the removal and replacement of unsafe cladding in high rise residential buildings over 18 metres in height and does not extend to other fire safety works (for example internal fire compartmentation) or works to residential buildings less than 18 metres in height or non-residential buildings. As such the new model clause is of limited application and it is not clear that this will resolve the difficulties encountered by organisations undertaking fire safety design services in obtaining PI insurance in the wider market. 
• Imposes a number of risk management provisions in relation to the carrying out of the building cladding remediation works (for example, the appointment of an appropriately qualified clerk of works, delivery inspections at key milestones, compliance with ISO compliance quality management systems etc.) as a condition of insurance. However, the implementation of the majority of these provisions will be outside the control of the design team. As such, any designer engaged in such works will need to ensure that such obligations are fully passed along the contractual chain to the clients and contractors or otherwise risk the invalidation of its PI insurance cover. 

The market for construction professional indemnity insurance has been difficult in recent years . . . but the clause should provide underwriters with greater confidence to offer effective insurance solutions for future work.

https://www.iua.co.uk/IUA_Member/Press/Press_Releases_2022/IUA_publishes_new_fire_safety_clause_for_high_rise_repairs.aspx