ARB publishes update guidance on PII

The Architect's Registration Board has recently updated its guidance on professional indemnity insurance. This guidance has been developed following the uncertainties in the insurance market and the increasing challenges architects have been facing in meeting their requirements to hold adequate insurance. These difficulties have meant architects (and other professionals) have struggled to obtain the appropriate cover and/or they have had exclusions placed on their policies. In turn, this has led to firms/architects being unable to meet their liabilities and the possibility of consumers being unprotected.

In light of this, the ARB proposed new guidelines and launched a consultation on them earlier in the year. This consultation sought feedback from both insurers and architects, the results of which have now been published by ARB.  

In discussing the new guidelines on its website, the Chair of the ARB states: "It was no longer tenable to require architects to hold insurance they simply could not obtain. Our updated guidance recognises that there are structural issues with the global insurance market that go beyond anything ARB can resolve on its own. But the changes we have made mean architects should find it easier to get compliant cover that still provides protection for consumers and the public."

The guidelines

The website lists the main points of the guidance as follows:

• "It will remain the case that architects should have adequate insurance before undertaking any new work;
• Coverage for certain types of claims – including fire-safety and cladding – can be held on an aggregate basis, and limited to covering direct losses;
• It will not be a matter of misconduct if an architect cannot acquire retrospective insurance to cover historic liabilities, because of new exclusions applied to their policy; and
• No architect should accept a minimum level of cover below £250,000"

Under the Building Safety Act, limitation for certain claims has been extended for up to 30 years. This has caused considerable concern to many professionals, particularly its impact on the need to obtain run-off cover and whether the minimum cover of six years for run-off should be maintained. However, the consultation response showed a clear 86% of respondents confirming this level of cover was adequate – on balance it was considered that any longer would be 'disproportionate to the risks involved'.

In addition to the implementation of the Building Safety Act, many architects have faced new exclusions placed on their policies. The ARB has confirmed this will not be a conduct issue for historic liabilities, but that architects must be able to document clearly why more comprehensive cover was not a viable option for them. 

In terms of the minimum level of cover, the ARB reported that 33% of the people who responded to the consultation believed that the minimum cover required was too low; yet 20% felt it was too high.  RIAS and RIBA both gave their support for retaining £250,0000 as the level of minimum cover. The ARB confirmed the minimum level of cover would be retained, however, there are a number of factors that an architectural practice should consider when determining exactly what cover is appropriate. This includes the scale and nature of work undertaken and that the minimum cover should only be a starting point/guidance.

In addition to the draft guidance, the ARB has also issued some helpful guidance on renewals for PII insurance.

Summary

The impact of the new guidelines remains to be seen. The ARB does not consider these changes will resolve all the issues the market currently faces but, rather, it will assist architects in obtaining adequate cover for the work they undertake.

The main points to take-away from the guidance are:

• Only undertake work for which you have cover
• Check that cover is adequate
• Check if there are any new exclusions to your policy. If there are, document the reasons why more comprehensive cover was not available.

If you have any questions on this article, please contact Alex Anderson or Katharine Cusack.