Communique August 1998
Reviewed June 2009, Updated Feb 2017
In a recent case a member firm, in spite of very commendable risk management measures, was caught up in a claim against a development for whom they acted as architects but under a tripartite agreement were also architects to the building contractor who is no longer in business.
The claims clearly pointed to inadequacies in the contractor’s performance. The greyness of aspects of the claim suggested to the insurers that a settlement, outside of legal action, was appropriate in the circumstances and the architect was required by the development company to contribute to a proportion of the settlement. This involved the member’s excess payment by the professional indemnity insurer plus a considerable portion from the developer’s insurers.
“Not Fair!” you say, and perhaps you could be morally correct - but unfortunately the potential for the case to cost an amount considerably in excess of the settlement was quite real (with of course the legal profession being the eventual winners).
It is times like this that normally rational architects get very upset and forget the real purpose of professional indemnity insurance.
Your contract with your insurer is quite simple. In exchange for your premium, your contribution to a proportion of any claim by way of your excess, your insurer will indemnify you for the remainder of your sum insured.
Until the law on proportional liability is changed the potential for being caught up in such an event is quite real.
The architect concerned had very commendable Quality Assurance measures in place for this contract which included contractor “sign off” for construction procedures, producer statements for design and construction, defects responsibilities, guarantees and so on. It is hard to imagine that they could have done better.
Certainly, if they stick with their procedures they will hopefully avoid future claims of this type - provided the contractor responsible is still around.