This chapter:
Professional indemnity insurance (PII) is an essential safety net. There are many ways in which an architect can manage the risks inherent in practising architecture (discussed more fully in section 9.3): carrying out proper due diligence in respect of new clients, keeping up to date with current practice by attending training courses, negotiating appointment terms to include limitations on liability, and so on. PII is best seen as part of a spectrum of measures that an architect can take to reduce the risk of claims occurring in relation to their work and to cope with claims if and when they do arise. PII is the vital final element that will provide protection for the architect when all the other risk management procedures have failed to prevent a claim arising.
As a general point, PII provides cover only in respect of the architect’s liability to other parties, such as the client; it is not equivalent to a fully comprehensive motor insurance policy, for example, which may directly benefit the insured party by providing a fund with which to purchase a replacement car in the event of theft. PII indemnifies the architect, protecting them in relation to the financial consequences of claims by others. PII policies are typically renewable annually, and operate on a ‘claims made’ basis; this means that the policy responds to claims made, or notified to the insurer as possible claims, during the currency of the policy only. The negligent act which is the root cause of the claim may have occurred in a previous period of insurance or even when the architect had a different insurer or different cover.
This should not be a problem for an architect who maintains cover with the same scope and at the same limit of indemnity year on year, or who has a growing practice and is increasing the scope and level of their cover. But if for whatever reason an architect has reduced the scope or level of their cover, this could leave them exposed.
The activities and liabilities covered, the people covered and the level of cover will all depend on the wording of the specific PII policy. The amount you will have to pay (the ‘premium’) to secure cover will also depend on your specific circumstances; the insurer will take into account a number of factors, including:
As well as circumstances specific to the insured party, the level of premium charged will also be dependent on the state of the insurance market as a whole. If the market is ‘hard’, an architect may find it difficult to obtain cover at a reasonable premium. Conversely, in a ‘soft’ insurance market, premiums will be reduced, and the scope of cover potentially extended, as insurers try to keep hold of their existing portfolio of business. The insurance market is inherently cyclical, but the cycle is unpredictable.
The RIBA endorses the RIBA Insurance Agency (a division of a well-known UK insurance broker) as its official insurance broking partner; their website is a useful starting point for an architect looking to obtain PII for the first time:
Both the ARB and the RIBA have strict rules relating to the maintenance of PII cover. Put simply, PII is a compulsory requirement for practising architects.
The RIBA Code of Professional Conduct, Guidance Note 4, states:
The RIBA guidance also refers to the ARB requirements.
Standard 8 of the ARB Architects Code provides that:
Current ARB guidance is that:
for each and every claim, however small the turnover of a practice may be. The question of what is ‘adequate and appropriate’ cover will in each case depend on the size of the practice and the nature of its work.
Even if the ARB and the RIBA Codes were not so prescriptive, it would still be vital for an architect to maintain PII cover. Almost every client will expect an architect to have appropriate insurance, as part of the enhanced service that a client should receive from a regulated professional.
Sophisticated clients will also be aware of the potential insolvency protection benefits conferred by virtue of an architect maintaining PII cover. If an insured party becomes insolvent, a claimant may try to recover their losses from the insurer under the Third Parties (Rights against Insurers) Act 2010, which came into force on 1 August 2016. Prior to the 1930 version of the Rights Against Insurers Act, if an insured party became insolvent before a claim was paid out, the insurance money would become an asset of the insured’s insolvent estate and the third party claimant would only receive a fraction of the money. Under the 2010 Act, the insured’s rights against the insurer can be assumed by the third party claimant, allowing the claimant to obtain the benefit of the indemnity in full.
The role of the insurance broker is central. The broker is the link between the architect and the insurer who agrees to carry the risk in return for the premium. The broker seeks to find the best fit between insurer and insured. A broker is an expert who can assist you with finding the right policy and level of cover for your business, at the right premium. They should help you to assess the nature and value of the work you undertake, as well as where you want your practice to be in the future; enhanced PII cover can help you find a place in the next league up. A good broker sees their relationship with the insured as a long-term prospect. Good brokers tend to be very loyal; they will fight your corner with the insurer at renewal time to secure the best premium for you.
Insurance brokers typically get paid on a commission basis, the commission being calculated as a percentage of the premium. Sometimes, a broker will instead be paid a flat fee; or a combination of commission plus fee Perhaps controversially, the broker may also receive a fee or commission from the insurer; a broker should generally be under an obligation to disclose on request the source of their earnings.
The key document underlying any policy of insurance is the proposal form. This is an application for insurance cover to be completed by the architect, which in its most basic form will usually require at least the following information:
Insurers need to be able to accurately assess a risk in order to decide whether to take it on at all and, if so, what premium to charge. The proposal form has to be completed fully and accurately – there is nothing to be gained by withholding relevant information or presenting information in a potentially misleading way in order to convey a more favourable picture of your business.
Both the insurer and, most importantly, the insured are under a duty to disclose in a clear and accurate way all material circumstances relating to the proposed insurance. Under the terms of the Insurance Act 2015, the party seeking insurance cover must make a ‘fair presentation’ of the risk to the insurer. If the insured architect breaches this duty, they may have given the insurer cause to deny cover in the event of a claim.
Sections 3(3) and 3(4) of the Insurance Act 2015 define what is meant by fair presentation as follows:
Section 7(3) of the 2015 Insurance Act states that a circumstance or representation is ‘material’ if ‘it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms’. There are no hard and fast guidelines as to what precisely may be considered material, although numerous decided cases provide examples of material facts which have been required to be disclosed in particular situations and section 7(4) of the Insurance Act gives some non-exhaustive examples. An insured architect is partly reliant on their broker, and partly on common sense. Existing or likely claims made against an architect will be material. Patterns of behaviour which have not yet led to a claim but which may make the architect a more risky insurance prospect may also be relevant; for example, a practice of failing to adequately review professional appointment terms.
A proposal form will typically remind the party seeking cover that:
and will go on to set out the insurer’s available remedies in the event of a breach of the duty of fair presentation that is not deliberate or reckless. The applicable remedy will depend on what the insurer would have done if the insured architect had complied with their duty – would the insurer have refused to enter into the insurance contract at all, or might they have agreed to insure but charged a higher premium for doing so?
The proposal form will end with a declaration section:
The party seeking cover will have to sign this declaration.
The onus of proving non-disclosure is with the insurer, but the effect of the insured party signing the declaration on the proposal form is that the insured is taken to have warranted the accuracy of the information supplied and the truth of the answers given.
The professional codes of practice make clear that any architect who undertakes professional work should ensure that their work is covered by insurance, whether the work is carried out (according to the ARB’s ‘PII Guidance’ leaflet, available online):
An architect, even an employed architect, has a duty to ensure that insurance is in place to cover their work. The policy will make clear who is covered; coverage needs to be drawn sufficiently widely and should include the legal entity of the practice (LLP or company, for example) partners, directors, members, consultants and employees, as well as former partners and former practice entities that have become part of the current practice. Sub-consultants, and joint ventures entered into by the insured architect, are not usually covered.
Professional work includes all work an architect may carry out, in whatever context: paid or unpaid, formally appointed or giving free advice as a favour. If someone is relying on your professional expertise, you may be liable to claims in the event that anything goes wrong.
The need for PII cover does not end when you retire, because claims may be made in relation to work you have carried out for many years after the date you completed that work. If you were an employed architect most recently prior to your retirement, or a partner in a larger firm, and your firm continues in business after your departure, you should continue to be covered by the firm’s PII policy – but you should take care to check that this is the case. If you were in business on your own account, or your old firm ceases to trade after your retirement, you will need to make your own PII arrangements. One other point – the Partnership Act 1890, which governs practices set up in the traditional way as partnerships, provides that a retired partner could remain liable, to any person who has not had notice of their retirement, for acts or omissions of the partnership occurring even after their retirement. An advertisement in the London Gazette is adequate notice to people who have not had previous dealings with the partnership, but those who have had prior dealings with the firm must be directly notified that a partner has retired. (This is the official newspaper of record for the UK; first published in 1665 and now available online, it is the place to find official information as diverse as legal notices relating to current company appointments and military despatches from the Battle of Waterloo.)
The ARB recommends a minimum of 6 years’ ‘run-off’ cover to provide insurance protection for an architect immediately following retirement. This is a minimum recommendation; a 6-year extension may be inadequate, given that the long-stop date for claims for latent defects is 15 years. In addition, actions in respect of negligence or breach of duty causing personal injury or death are not, in certain circumstances, subject to any specific long-stop limitation period.
The decision you make about the extent of run-off cover required will be informed by the nature of the work you were carrying out prior to retirement. Risks associated with large-scale, complex, high-value projects require more than the minimum recommended cover.
Can a claimant bring an action for damages resulting from negligence or breach of contract against the architect’s estate after their death? Unfortunately, yes; the Law Reform (Miscellaneous Provisions) Act 1934, section 1(1), states:
Damages can even be recovered if the estate has been distributed to the beneficiaries named in the architect’s will, and in an extreme case the ultimate sanction of the claimant would be to compel the executors to seek refunds from the beneficiaries. You should consider maintaining PII cover to protect your estate in the event of your death at least for the 6/12-year contractual liability period; this may provide a degree of financial comfort in otherwise profoundly upsetting circumstances The risk of such an action against the estate of an architect who was formerly employed by a practice constituted as a company or an LLP is much reduced, as individual directors, employees or members (of an LLP) generally enjoy immunity from personal liability for the organisation’s debts and obligations to third parties.
There is no such thing as a standard insurance policy wording – the precise words and emphasis used differ from insurer to insurer and policy to policy – but certain phrases and usages do tend to crop up repeatedly. PII policies also all tend to cover the same issues.
This element of the policy, also known as the slip, contains the core details of the policy:
The definition of the insured party should generally cover the firm itself, if it is a separate legal entity such as a company or LLP, as well as any:
The limit of indemnity is the stated maximum amount that the insurer will pay in respect of damages payable by the architect to a claimant. A good PII policy will state that legal defence costs and expenses will be in addition to the limit of indemnity, otherwise legal costs will eat into the headline indemnity figure.
The limit of indemnity may be expressed in two main ways:
Most architects maintain, and most clients expect, PII cover on an each and every claim basis.
However, within the headline limit it is common for there to be other discrete limits applying to specific types of loss. Usually, claims relating to pollution, contamination and date recognition will be subject to an aggregate limit equivalent to the overall limit of indemnity, even if the limit of indemnity under the policy generally applies on an each and every claim basis. Cover for asbestos claims, if it is provided at all, will very often be at a reduced aggregate limit; for example £1 million in the aggregate, when the headline limit of indemnity is £5 million each and every claim.
This figure, otherwise known as the ‘deductible’, may be familiar from typical motor insurance policies. It is the sum that the insured must pay in relation to each claim, and below which the policy does not respond. Because most claims will be small, covered in whole or in large part by the excess on each policy, the insurer is able to keep the premiums they charge to manageable levels. Generally, if an architect arranges with the insurer a low excess, they can expect to pay for that through a higher premium than would otherwise apply. An excess is also an incentive for the insured to avoid as far as possible poor practice that leads to claims.
Some clients will, in the insurance clause of a professional appointment, attempt to restrict the possible level of excess under the architect’s PII policy by requiring that the excess shall not be unreasonable or onerous (although it is unclear what these would mean in practice) or by specifying an upper limit. The architect should not accept such restrictions; generally any attempt on the client’s part to be prescriptive about the detailed content of the architect’s PII policy should be resisted.
The insuring clause in the PII policy is the basis of your PII cover. Such clauses tend to be rich with meaning, and if you have any doubt about what is and is not covered by the policy, ask your broker to explain. Over time many of the stock phrases that appear in insuring clauses have taken on defined meanings and a broker should be able to explain the practical effect of any of the words used.
The insurer provides an indemnity to the insured architect. The money paid out by the insurer will compensate the insured for their actual economic losses. Even if the headline amount of cover under the policy is higher, the insured will only be able to recover the level of loss that can be proved to have been suffered. PII is intended to place the insured architect in the position they would have been in had the claim not been made.
The indemnity is given in relation to the insured architect’s legal liabilities. In theory, to become a legal liability for the purposes of a PII policy the architect must first have been found liable to pay damages by a court or other competent forum; in practice, an insurer will typically take over conduct of the insured architect’s defence against the claim.
Because ‘legal liability’ is very widely drawn, PII policies will invariably include qualifications setting out what is not covered, in the form of ‘exclusions’, discussed in section 9.2.6.
Under the insuring clause set out above, the legal liabilities must result from a claim first made and notified during the period of the policy. It is irrelevant when the damage occurs; all that matters is when the claim is made against the insured and notified to the insurer.
To activate the policy:
These requirements narrow the focus of the insurance cover to professional negligence, as opposed to negligence in any other area linked to the architect’s working life. If the architect negligently crashes into someone else’s car, causing damage, this damage will not be covered by a PII policy because it was not incurred as a result of a failure by the architect to discharge their professional duty of care. ‘Professional business’ may be defined by the PII policy to further limit the scope of the cover, for example by describing the architect’s professional business as:
In this way the insurer seeks to ensure that their insured only engages in business activities that are within the reasonable scope of the insured’s professional competence.
Exclusions may come in many forms, dealing with:
The most important standard exclusion clause relates to the type of legal liability that will trigger policy coverage. Historically, PII coverage was intended to protect the insured architect against the risk of damages for negligence. Nowadays, the scope of coverage is better understood as protection against civil liability as a whole, including contractual liability, but with limits; proof of negligence is still a basic requirement for a claim under most PII policies.
Many insurers, while providing a relatively broad civil liability cover, do nevertheless seek to exclude coverage for contractual liability to the extent that such contractual liability goes beyond that which would have been imposed on the architect anyway, at common law, in the absence of the contract. The exclusion clause may read:
Strictly understood, this clause would exclude liability for certain claims under collateral warranties; for example, in relation to purely economic losses, for which the law of negligence now provides no actionable duty of care. To avoid this outcome, many policies go on to specifically include cover for liabilities arising under collateral warranties.
The sample wording above seeks to make sure that all claims are based on proof of negligence, in order to exclude cover for claims based on a more onerous duty of care – such as a claim based on the breach of an indemnity or a fitness for purpose clause. Any such claim would in all likelihood not be covered by a standard PII policy. Taking the example of a fitness for purpose obligation, an architect’s design might not be fit for purpose even though it has been produced using reasonable skill and care; there is no need for the claimant to prove negligence if they can show that a design is not fit for purpose.
The sample wording can be read even more restrictively. In the absence of a contractual duty of care, the common law duty imposed on any professional, including an architect, is to carry out their work exercising the reasonable skill and care to be expected of an ordinary skilled professional – nothing more. So in theory, any enhanced standard of care contained in a professional appointment or collateral warranty may call into question the architect’s PII coverage because the PII policy is likely to be based on the common law standard. PII policy wording may expressly provide that the insured must not agree to any duty more onerous than the exercise of reasonable skill and care; or this may be implied, as in the sample wording above, by referring to liability that would have existed in the absence of the contractual provision.
An architect should always seek to limit their duty of care to the standard of the ordinary skilled professional. However, as discussed above in the context of duty of care clauses generally, it would be rare for an insurer to take this point in isolation as a basis for denying cover. The enhanced duty of care is discussed further in section 5.2.6.
It is quite usual for pollution, contamination and, less often, date recognition (a nod to the concern that took hold in the build-up to the year 2000, when many predicted a deluge of claims relating to a potential failure by computer systems to respond properly to the changeover from ‘99’ to ‘00’ – it never came!) claims to be subject to an annual aggregate limit even if the PII policy overall provides cover on an each and every claim basis. Claims relating to asbestos are likely to be subject to a further reduced annual aggregate limit, or in some policies excluded altogether.
These exclusions and limitations reflect the exceptionally unpredictable nature of the risks involved; the discovery during a project of an asbestos issue could result in a claim which has a quantum and a longevity out of all proportion to the architect’s fee for involvement in the project. It is important that the wording of any professional appointment or collateral warranty insurance obligation properly reflects not just the headline PII figure, but also any internal limitations or major exclusions within the policy.
It is generally not realistic for a client to object to a proposed amendment that is required to bring the appointment into line with the PII cover actually maintained by the architect. There is no advantage for the client in insisting on imposing an obligation which is not covered by the architect’s insurance, and this argument is often enough to convince a client. Some clients will require written proof from the insurer or broker that the architect’s interpretation is correct and that the existing wording would jeopardise the architect’s cover. Other clients will refuse to compromise.
It will sometimes be possible to agree a one-off amendment to the policy (an ‘endorsement’) to deal with the client’s concern, but this will not always be possible or may only be available subject to an increased premium, which could make the change unrealistic for the architect.
If the architect has checked with their broker that a particular provision in an appointment or collateral warranty does create a PII policy coverage issue, and the client is still unwilling to compromise and no amendment to the policy is possible, the architect is left with a commercial decision to make. It is never sensible to agree a contractual obligation that is known or suspected to be outside the scope of your insurance. But you should weigh up the importance of the job and the client against the likelihood of the uninsured obligation leading to a claim and the potential size of any such claim. Overall, is the risk one that can be borne by your business without the benefit of PII cover?
Every PII policy will contain a clause setting out how and when the insured must inform the insurer in the event of a claim, or potential claim, with wording such as:
In the wording above, the giving of notice by the insured is an express condition of cover, so any failure by the insured to comply strictly with the obligation to give notice as soon as possible will give the insurer reason to refuse to indemnify the insured. The notice has to be given at the right time and with the correct content. Dust off the policy itself – what does it require you to do? Speak to your broker to ensure your approach is correct.
The notification clause wording raises further questions for the architect:
Every case depends on its particular circumstances, especially in relation to timing of the notification. In 2008, in the case of Aspen v Pectel the High Court had to consider PII policy wording that required the insured to give ‘immediate written notice with full particulars of any occurrence which may give rise to an indemnity’. The insured architect had not notified insurers of a fire on one of the insured’s projects in 2004. Nearly 3 years later the architect received a copy of a solicitor’s letter from the client alleging liability on their part; notification was then sent to the insurer, but the insurer denied coverage on the basis that notification had not been given in line with the policy requirements. The Court agreed, and held that the fire itself was an occurrence which may have given rise to a claim and therefore notice to the insurer should have been given immediately afterwards. In the 2009 case of Laker v Templeton, the Court of Appeal took a more lenient approach when it had to decide whether an insurer was entitled to deny cover because the insured architect’s notification followed not the event itself, but the instigation of a formal dispute resolution procedure against the insured. The difference may have been the policy wording; the policy being considered by the Court of Appeal required notice to be given immediately of circumstances which were ‘likely’ to give rise to a claim. It is a fine distinction, but the formulation ‘circumstances which may give rise to a claim’ seems to require more notifications than the phrase ‘circumstances which are likely to give rise to a claim’.
In practice it is best to err on the side of caution and provide as much information as you can to the broker and insurer as soon as possible. Take advice from your broker in borderline cases – they have a duty to advise you whether action is required, and it is what they are there for – but if there is any doubt it is best to notify. An excessive number of notifications may have an impact on the premium your insurer decides to charge when it comes to renewal time; but failure to promptly notify a claim has the potential to be far more expensive, if the insurer declines cover as a result. An insurer can reject a notification; but an insured party should in such circumstances be persistent and repeat the notification. If the event does develop into a full-blown claim, the insured architect’s persistence will have been justified, and if it does not there is generally no harm done by the architect’s cautious actions.
If notification is necessary:
In addition to any basic content requirements set out in the terms of your PII policy:
It is in the interest of the architect that the PII policy wording incorporates an ‘innocent non-disclosure’ clause. This may offer some protection against refusal of cover in circumstances where there is an innocent late notification without any intention to mislead or defraud and which does not prejudice the insurer’s position. The PII policy wordings arranged through the RIBA Insurance Agency, for example, incorporate an innocent non-disclosure clause, and also offer the added benefit of allowing an RIBA member insured with the RIBA Insurance Agency to refer any dispute with the Agency to the President of the RIBA, in addition to the possibility of arbitration in the event of a dispute. As a minimum requirement, the architect should ensure that any PII policy they take out incorporates an arbitration clause to deal with disputes.
Every firm should have a designated individual (with a deputy to cover holiday and illness absences) who is available to facilitate the notification process and deal with other issues relating to the firm’s PII cover and risk management more generally. In most practices, acting as ‘insurance manager’ will not be a full-time role and can be combined with other duties. The important point is that other people within the practice are aware of the role, know what the insurance manager does and have the ability and the confidence to contact them when an issue arises. The insurance manager should be the focus for queries about potential claims; theirs should be the first number that a person knows to call if there is a problem on a project that may require a PII notification.
The insurance manager must be familiar with the requirements of the PII policy, both in terms of timing of any notification and also the level of detail required for a notification to be valid beyond dispute. They in turn must have the confidence to make sound decisions about whether a particular set of circumstances is likely to give rise to a claim. They must make sure they have sufficient information to make the correct call, taking advice from solicitors and the broker as necessary.
The insurance manager should have sufficient experience to recognise not only clear-cut instances when an issue should be notified, but also when notification is not necessary and when the broker should be consulted. If the notification can be trusted to the insurance manager, this frees up the project team to deal with the equally important client-facing practicalities:
The project team should bear in mind one golden rule, while all the time trying to maintain good relations with the client – never admit liability.
Risk management is the process of reducing the number of opportunities for mistakes to occur, and so reducing the number of claims that may be made against an architect. Effective risk management will also enable an architect to be better prepared to defend, and ideally defeat, claims when they do arise.
As part of their insurance package, insurers and brokers often offer risk management advice though newsletters, seminars and occasionally by going into the business of the insured architect and carrying out a risk audit. There is a reason for this; the insurer has a vested interest in the ability of their insured architects to manage risks and prevent, as far as possible, formal claims arising. It is of course also in the best interests of an insured architect to manage risks proactively and take action to prevent claims. Architects who regularly notify claims tend to find that their premiums go up, and there are in any case always costs (management time, legal fees) incurred when dealing with a claim that may not be covered in full by insurance, even if the PII policy covers the claim itself. It is best to avoid the negative impact of claims by taking steps to manage them out. The RIBA Insurance Agency, with the RIBA Practice Department, has produced a ‘Guide to Understanding Risk Management’, which can be downloaded free of charge at:
Underlying everything are the day-to-day decisions of individuals. How people act on a project and react to potential problems will govern how well an organisation manages risks. Some of the areas where experience, training and written guidelines can help individuals to make better decisions and consequently minimise risks are set out below.
This is not simply an insurance issue. Architects need to be alive to the risks associated with the appointment of sub-consultants. Does the sub-consultancy agreement always have to be a formal written agreement? The administrative hassle can be daunting, and when the agreement is finalised, how can the architect be sure that the sub-consultant’s obligations fully cover the services and performance standards required, and fully protect the architect’s position? If it is the architect’s choice to appoint a sub-consultant, and if the sub-consultant is carrying out services for which the client is paying the architect, then the client is entitled to sue the architect in the event of any default.
In the absence of any restriction in the appointment, the architect is free to engage a sub-consultant to carry out any part of the services. A bespoke appointment is more likely to contain a clause requiring the architect to notify the client and obtain their consent to the engagement of the sub-consultant; sometimes the client will also have a right to approve the terms of appointment of the sub-consultant. The architect should seek wording in the appointment to the effect that consent cannot be unreasonably delayed or withheld, and retrospective consent should not be required for any sub-consultants already engaged by the architect prior to execution of the architect’s own appointment.
There are two critical issues an architect must deal with in a sub-consultant’s appointment:
Because of the need to be able to enforce these obligations against the sub-consultant if necessary, there should always be a written sub-consultancy agreement, and if the architect’s appointment is executed as a deed, so must the sub-consultancy agreement. If not, the architect may have to face the final 6 years of exposure under their appointment with no scope for passing liability on to the sub-consultant. In addition, a written sub-consultancy agreement may be a pre-condition of the client’s consent to the sub-consultant’s engagement.
‘Back to back’ in this context is not a precise term; it is a commonsense requirement best illustrated by giving examples. If the architect’s appointment requires the architect to carry out their services:
it is not sensible for the architect to sign up the sub-consultant to carry out their services:
In this example, the architect’s standard is more onerous; the sub-consultant could complete their services fully in accordance with the terms of the sub-consultancy agreement but still put the architect in breach of their appointment with the client.
In addition to marrying up the basic standard of care in the appointment and the sub-consultancy agreement, there are often a number of obligations in the architect’s appointment that should be specifically stepped down into the sub-consultancy agreement, for example:
As well as specific provisions ‘stepping down’ obligations from the architect’s appointment into the sub-consultancy agreement, the architect should consider including catch-all wording to avoid any risk of obligations slipping through the net:
The indemnity wording above may be subject to the same objection as any indemnity wording in an architect’s appointment – is it insurable? It may not be, in which case a more limited form of words covering the main point (that the sub-consultant must not cause or contribute to any breach of the architect’s appointment) should be acceptable.
As part of the set of current RIBA PSC 2018 suite, the RIBA publishes a Sub-Consultant PSC to help facilitate sub-consultant appointments that are back to back with the RIBA Standard, Concise and Domestic PSCs.
As discussed above, the main influence on the number of claims a practice is subject to, and the impact those claims have on the practice, will be the calibre of the individuals within the practice and the way in which they are trained and managed.
Everyone in the practice needs to know about the role of the insurance manager and the procedure for identifying and notifying potential claims to them. If there is no individual identified as insurance manager, there must be another clear and well-publicised procedure for passing information about potential claims up the management chain. All employees need to understand the PII policy requirements for prompt notification.
The practice must also have an adequate procedure for identifying circumstances likely to give rise to a claim and which must be brought to the attention of insurers as part of the PII renewal process. Part of the insured architect’s duty of utmost good faith when completing their renewal paperwork is to bring potential claims, not previously notified, to the insurer’s attention. The insurer cannot properly assess the risk of providing cover if the insured party has withheld information, whether deliberately or because the insured has made inadequate interna inquiries. If a PII policy is written or renewed on the basis of inadequate or incomplete information, the insurer may not be obliged to provide cover when a claim is made.
The flow of information internally is key to both processes: claim notification and full disclosure on renewal. If at all possible, the best and simplest practice is to have an insurance manager to act as a focus for the flow of information upwards, either directly from individual project team members or through their managers. Internal education is important; employees should be reminded regularly of the firm’s notice and disclosure obligations under its PII policy, and how to go about passing information on. Prior to renewal, it is good practice for the insurance manager to run seminars to remind staff of the importance of full disclosure of any potential claims as part of the renewal process. The insurance manager should then send out to all staff members (not just managers or senior staff) an email or memorandum requesting information in respect of any circumstances that may give rise to a claim. Returns, positive or negative, must be compulsory.
Outside the renewal process, there has to be a clearly defined and understood route for information about a potential claim to get from the member of the project team dealing with the matter up to the manager, partner or director who will make the decision about whether or not to notify. Monthly meetings of managers are not necessarily enough. The risk of failing to notify a claim when a problem arises must be something at the forefront of the minds of project team members lower down the chain. Communication between managers is important, but the training given to all employees is arguably more important; if a project team member cannot identify a potential claim or does not know what to do when a problem arises, the process cannot begin.
Effective risk management starts with the quality of the people in your business, and therefore it is important to ensure that only personnel of a suitable calibre are recruited.
None of these checks guarantees the quality of a candidate – it is only really possible to get a full picture of a candidate’s abilities and deficiencies when they begin work in earnest within the practice – but taking recruitment seriously can go some way to minimising the risk of taking on an unsuitable candidate.
There must in any practice be an established and understood management and reporting structure.
Effective management is also about assigning the right people to the right projects – the work must be appropriate for the particular qualifications, skills and experience of the team members.
Continuous professional development is important to maintain high standards of performance.
It can be difficult to encourage staff within a practice to focus on such matters when they just want to get on with their core practice of architecture, but following correct office procedures and maintaining accurate records need to be seen as integral to the core practice. All staff should be trained to follow correct procedures.
It is essential that you develop a strategy for assessing the risk of taking on a potential new job. These pre-agreement matters are considered in detail in section 7.1.2 in the context of what the architect should look for in a client. An architect must also develop strategies for managing the relationship with the client during the course of the project.
One factor that should not be overlooked as a risk management tool is the importance of good legal advice, both when considering or drafting the terms of the professional appointment, and during the course of the project in response to client queries or perceived potential problems. Legal advice is also vital as and when complaints are received or disputes arise – legal advice provides a framework within which the architect can manage the client relationship. If an accusation of professional negligence is made, you should never admit liability, but only your legal advisor will be able to tell you what the chances are of you actually being found to be liable. In such circumstances, your solicitor will be able to give advice on how best to manage your response to avoid giving away arguments that you could later use in your favour to reduce your liability, or your share of liability.
As with all professional relationships, word of mouth is often the surest way, but there are a number of other routes to obtaining the services of a suitable legal advisor:
You should in any case arrange a face-to-face meeting with a potential legal advisor, if at all possible, before agreeing terms with them. Good legal advice is not often cheap, and it is important to get a good feel for your advisor.
It is important that you are made to feel well looked-after, and are made to feel that your work is important to your solicitor, because you will generally only be dealing with them in a neutral or negative context. They will draft and negotiate your appointment terms, which you will only need to rely on in the event of a dispute; they will be the call you make in a panic when an adjudication notice arrives from your client.