Professional Indemnity Insurance (PII) is a crucial safeguard for architects. It protects against claims of negligence, errors, or omissions and other civil liabilities arising from the performance of architectural services.
To ensure that you and your business are adequately protected, it is essential to review your contracts carefully. PII makes sure that the terms governing your architectural services are clear, fair, and aligned with your cover, so both you and your client understand responsibilities and expectations. At the same time, it helps you spot and negotiate away onerous clauses—such as unlimited indemnities, punitive damages, or uninsurable warranties—that could push liabilities outside the scope of your insurance and leave your practice exposed.
Here are some key do’s and don’ts to consider:
The Do’s
- Do understand your coverage
Before reviewing any contract, ensure you have a clear understanding of what your PII covers. Familiarise yourself with the policy limits, exclusions (particularly the contractual liability restrictions), and conditions. - Do include a clear scope of work
Clearly define the scope of services in the contract, ensuring that every task falls within an architect’s usual duties and professional remit. This helps to set expectations and limit your liability to the agreed-upon services. Ambiguities can lead to disputes and potential claims. - Do specify terms and conditions
Outline the terms and conditions of your services, including payment terms, key timeline objectives, and deliverables. This helps to manage client expectations and provides a reference point in case of disagreements. - Do include a reasonable duty of care clause
Ensure the contract expressly states that all services will be performed with reasonable skill, care, and diligence, reflecting the standard expected of an architect. This clause will set a clear benchmark for performance, align with PII requirements, and strengthen your defence against any allegations of breach of contract terms that go beyond your common law duty to exercise reasonable skill and care. - Do limit your liability
Incorporate a liability cap to limit the amount you could be liable for in the event of a claim. Also, a net contribution clause makes sure you only pay your fair share of liability when others are also at fault.. These provisions can help to protect your business from significant financial loss beyond what your PII may cover. - Do seek legal/insurance advice
Arrange for legal and insurance reviews of your contract to ensure it complies with relevant laws and adequately protects your interests. Legal advice can help identify potential risks and suggest appropriate amendments. An insurance review can flag any conditions that may result in liabilities beyond the usual coverage scope of PII. - Do maintain clear communication
Keep open lines of communication with your client throughout the project. Document all communications and decisions to provide a clear record in case of disputes. However, be wary that many contracts will contain provisions to clarify that any communications outside the contract cannot be relied on. So, ensure that everything intended to form part of your agreement with your client is contained in your contract and updated as needed. - Do regularly review and update contracts
Periodically review and update your contracts to reflect any changes in your services, industry standards, or legal requirements. This ensures that your contracts remain relevant and effective.
The Don’ts
- Don’t use generic contracts
Avoid using generic or one-size-fits-all contracts. Each project and client relationship are unique, and your contract should be tailored to reflect the specific terms and conditions of the engagement. However, some contracts, such as RIBA's suite of Professional Services Contracts, are drafted specifically for the professional appointment of an architect and are drafted with PII coverage in mind, so these are a great ‘off-the-shelf’ option. - Don’t overlook exclusions and limitations
Pay close attention to any exclusions and limitations in your PII policy. Ensure that your contract does not inadvertently expose you to risks that are not covered by your insurance. Pay particular attention to any contractual liability exclusions/restrictions. - Don’t ignore indemnity clauses
Be cautious with indemnity clauses that require you to indemnify the client for certain losses. These clauses can significantly increase your liability and may not be covered by your insurance. PII policies will generally exclude any additional losses that an indemnity clause creates beyond what you would owe in the absence of the indemnity clause. - Don’t agree to absolute obligations or performance warranties
Avoid clauses requiring you to unconditionally guarantee specific results, performance levels, or outcomes beyond the exercise of reasonable skill, care, and diligence. Such absolute obligations and warranties can expose you to liabilities outside the scope of your PII cover, since insurers typically exclude guaranteed outcomes. Where these clauses appear, negotiate to amend the wording so your commitment is limited to performing services with reasonable skill, care, and diligence in line with professional standards. - Don’t agree to a foreign law and jurisdiction being applied without seeking local professional advice
Your PII policy may, in theory, cover you for contracts that are subject to a jurisdiction that is outside the UK; however, the interpretation of the contract will be subject to the laws that are set in the contract, which could result in different requirements than if the contract was subject to the laws of just England and Wales. Therefore, ensure that it falls within the remit of the territorial and jurisdictional limits of your policy and that you familiarise yourself with such variances and seek local legal advice if required. - Don’t assume verbal agreements are sufficient
Always document agreements in writing. Verbal agreements can be difficult to prove and enforce, leading to potential disputes and claims. Disputes where obligations are not clearly set out often lead to significant legal costs in figuring out what the agreement is between the parties, even if you are found not to be at fault. - Don’t rush the review process
Take the time to thoroughly review the contract before signing. Rushing through the review process can result in overlooking critical details that could impact your liability and coverage. - Don’t forget to include dispute resolution mechanisms
Include dispute resolution mechanisms, such as adjudication, mediation or arbitration, in your contract. These can provide a more efficient and cost-effective way to resolve disputes compared to litigation.
Reviewing your contracts with a keen eye on your PII is essential to managing risk and protecting your business. By following these do’s and don’ts, you can create robust contracts that clearly define your responsibilities, limit your liability, and reduce the risk of incurring uninsured losses. Always seek professional advice when in doubt, and maintain clear and open communication with your clients to foster strong and transparent working relationships.
PII generally operates on a claims-made basis, meaning it responds only to claims first notified during the active policy period. This means that the policy terms which are in force at the time a claim is made against you may not be the current policy; thus, it will be the terms and conditions of the policy which is in force at the time the claim is notified that is likely to determine whether the claim is covered.
For more information, visit RIBA Insurance Agency to view the products available. You can get a quote for PII and other products through the online platform.
Text by Gallagher, an insurance specialist who advises on insurance covers and is one of the UK’s leading insurance brokers. RIBA Insurance Agency is a trading name of Gallagher.
Conditions
This information is not intended to constitute any form of opinion or specific guidance and recipients should not infer any opinion or specific guidance from its content. Recipients should not rely exclusively on the information contained in the bulletin and should make decisions based on a full consideration of all available information. We make no warranties, express or implied, as to the accuracy, reliability or correctness of the information provided. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide and exclude liability for the statistical content to fullest extent permitted by law.
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