Your current PI policy expires 1 December at 4pm. If you do not renew before then you may be uninsured, and in breach of your undertakings to others.
Keep an eye on your inbox for more information. Invitations to renew the insurance contract are expected to go to inboxes early November.
It is helpful for NZACS – and hence for members generally - that you renew your PI cover as soon as you can after receiving the invitation to do so. Make sure to do it before November 30th.
Sometimes Aon needs to negotiate with insurers on a member’s behalf if there are special cover requirements, or the member has a ‘claims history’: this can delay finalising renewal, and is another reason not to leave it to the last minute.
Insurers and NZACS are subject to market forces. PI costs for members are eased by our education structure, collective buying power and the involvement of the Claims Committee. Your firm’s PI costs will depend on your risk profile and throughput.
Kristene Crook (Aon) reports:
Discussions with insurers for the 2023 NZACS members insurance renewal are attracting positive responses and unlike asset and motor insurance which has had large increases in premium, we are expecting nominal premium increases below inflationary percentages. Other factors that can affect your premium are fee income, the types of activities undertaken, claims that have had claims pay-outs and changes to your policy limit.
Renewal Requirements:
You will be asked to check your policy information, declare your fee income for your last full financial year, give a breakdown of the types of activities undertaken and answer the risk management questions.
This is a good time to review your policy limit.
Remember that you cannot limit liability under the Consumer Guarantee Acts so a five times the fee or $250,000 contact limitation could be insufficient on ‘domestic personal’ projects. When thinking about your level of professional indemnity insurance, consider- the types of projects (complexity, uniqueness, sourcing of materials, project values, increasing building costs, prospect for delays), the number of projects (the risk of having more than one claim in the year). Bear in mind the increased costs of defending a claim, and associated litigation/disputes. These cost can arise even if you are “innocent”!
The cost to increase professional indemnity insurance cover may not be that much more than you pay currently, especially between $250,000 and $1,000,000 so its worth looking at quotation options if you are unsure if your insurance limit is going to be enough should things go wrong.
Notify now:
Your insurance contract expires 4pm 1 December 2023 and your insurers do not have to accept a claim notification after the insurance contract has expired. If you are aware of a claim against you, report it to Aon now. Circumstances known to you (events, losses, disputes) that could end up in a claim against you are also required to be notified before 1 December 2023 as required by the contract terms of your insurance. Notify the team at Aon nz.nzacs@aon.com if you are aware of a claim or circumstance. If in doubt Notify and Aon will discuss the circumstances with you to determine if it should be passed on to insurers. You will not be penalised for notifying a circumstance, but you may be penalised for not notifying within the required timeframe.
We’ve recently seen some claims arising from developer clients disgruntled about projected financial returns being lower than were relied on during the early design stages.
Michael Davis and Alec Couchman provide comments from their collective experience:
Financial viability is at the core of a developer’s view of a successful project, and architects need to understand their role in it.
Examples of possible causes for a claim range from less than expected Net Lettable Area (NLA) in a retail or commercial office development; lower than expected numbers of housing units in a residential masterplan; lower numbers of rooms in a building conversion to a hotel; or design concepts where the cost outpaces the value.
A developer will rely on the figures that architects provide in the early design stages to determine what they will pay for a development opportunity and to monitor the ongoing feasibility of a project. You should make it clear what your assumptions are, and what limitations there are in the information you provide.
On the specific matter of measuring floor areas, the Property Council of New Zealand and the Property Institute of New Zealand jointly provide two documents which are available here
It is important for any architect working on these kinds of projects to familiarize themselves with these two documents and refer to them in any relevant area calculation. The Property Institute also produces a Guidance Paper 601 on Methods of Measurement which covers interpretations of terms like Gross Building Area, Gross Floor Area etc.
In addition to referencing and following these guides it’s advisable to include caveats! Some examples include:
Be mindful of the impacts of changes to the brief or design and their impact on yield. If you become aware of changes which are likely to affect the financial outcome of the project, inform the client of your views on the matter as soon as appropriate. Be alert to “mission creep”, and deal with it before it becomes critical. For example, a change to a thicker external wall build-up against a boundary as the result of value engineering can be detrimental to the NLA for an office building but not necessarily for the measured size of a rented apartment.
Different clients will have differing positions in relation to the value arising out of NLA , versus that from the quality or amenities or the market positioning of a project. In this respect, some cost cutting efforts may merely swap initial costs for later ongoing costs. Costs do not equate to value, and you should recheck your design intent against client objectives as the design evolves.
The Claims Committee has received a report from a mid-sized firm that an IT review revealed that they received about 2-3 cyber-attacks per week including malware. An attack that did get through was a sub-consultants PDF invoice that had had the bank account details changed: luckily the bank noticed the discrepancy and the account was frozen.
Further to the recent NZIA alert, NZACS Members are encouraged to review their cyber security set-up including: