For physical damage to the works, creating a delay in the hand-over of the project, not to mention countless other scenarios where a Professional Indemnity policy can provide you with valuable insurance cover.
This type of insurance is basically intended to fill in certain gaps in the Contractors All Risks policy
The insurance cover under a Professional Indemnity policy for contractors can be problematic and partial. If it was really possible to arrange full cover, then a long list of construction risks could be insured against – and that’s not the case. The policy provides cover for losses arising from the profession of the insured as a contractor, however in the majority of cases there is an exclusion of re-performance of work, meaning that many possible claim scenarios are not covered.
Nonetheless in the majority of public tenders there is a demand to arrange Professional Indemnity insurance in addition to Contractors All Risks insurance
as a precondition to participating in the tender.
The cover under the policy is for claims in accordance with the Torts Ordinance (New Version) - 1968 due to a breach of a professional duty including claims for pure financial loss (to differentiate from physical damage covered which is under the Contractors All Risks policy), as a result of an error or omission of the contractor or anyone acting on its behalf, however the cover is subject to certain fundamental exclusions and in many cases the policy does not provide a solution for the types of claims that can be expected due to these exclusions.
Certain damages can even be defined as “financial loss” under a Contractors All Risks policy such as: crooked construction, mistakes in calculations and measurements, construction in breach of the plans and the like.
Third party claims for damages of this type are not covered under a Contractors All Risks policy.
Some of these claims can be covered under a Professional Indemnity policy covering consequential losses to third parties subject to the terms, conditions and exclusions of the policy.
Further useful reading concerning Products Liability and combined Professional Indemnity and Products Liability insurance