The Architects Registration Board (ARB) is to revise its guidance on the professional indemnity insurance (PII) cover that registered architects are expected to maintain. This is in response to rising premiums and the difficulties practices face in obtaining adequate levels of cover.
It has published revised PII guidance in draft and launched a public consultation on the proposed changes, which will remain open until July. Once guidance has been confirmed later this year, it will no longer be a matter of misconduct when architects are unable to acquire retrospective insurance to cover historic liabilities, as long as they have made reasonable efforts to do so.
An architect that has acted in accordance with ARB’s Code of Conduct and Practice but has had elements of their insurance removed through no fault of their own will not face regulatory action.
The changes seek to directly address the widespread restrictions being imposed by insurers on cover for fire safety and cladding. Under the proposals, cover for these two types of claim would now be arranged on an aggregate basis, rather than an “any one claim” basis. Cover can also be limited to direct losses arising from negligence (consequential losses may be excluded).
Architects will still be expected to take all reasonable steps to find comprehensive cover, but will be allowed to accept such restrictions if there is no alternative; for instance, where comprehensive cover is judged not viable for the business. Upon renewal, reasonable steps should be taken to remove limitations and there should be evidence that such steps have been taken.
Draft guidance on uninsured liabilities instructs architects to advise former clients of any new exclusions to their PII cover that may be relevant to historic liabilities. Architects are also expected to write to the ARB to explain the circumstances of any non-insurance for liabilities.
It remains the case that all architects are expected to have adequate and appropriate insurance to cover their work, but now with the proviso “where it is available”. New commissions should not be accepted if appropriate cover is not in place.
The minimum level of cover for each and every claim is being kept at £250,000, a figure that has remained unchanged for 15 years. The ARB argues that allowing a level of minimum cover lower than that would only produce negligible savings on premiums.
The Building Safety Act, which came into force in April, amended the Defective Premises Act (DPA) so that it covers refurbishment and other works in addition to new dwellings; and extends the time period for compensation claims for retrospective work from six years to 30 years.
The ARB states that it believes run-off cover for historic liabilities where the practice has ceased should be maintained at six years (five years if practising in Scotland). It takes the view that requiring architects to maintain run-off cover for a longer period would be disproportionate to the risks involved.
The most significant question in the ARB’s consultation seeks views on whether aggregated cover for fire safety and cladding that is limited to direct loss will improve access to PII.
The consultation also invites architects to share their views on the impact its requirements have on their practice; whether exclusions on policies are preventing their ability to practice; and whether practices have been forced to modify the way they practise to remain compliant with insurance.
John Winter is Financial Lines Specialist at specialist PII broker Apex Insurance Brokers. He expresses doubt that the ARB accepting aggregate cover for fire safety and cladding will in itself improve access to insurance cover.
“Insurers still hold all the cards,” he finds. “And they are taking decisions whether to write fire safety cover or not. The only real change for architects is that if aggregate cover is available to them, they know it will be acceptable to the ARB.”
He does note that more insurers are starting to write fire safety cover for practices moving forward as a result of the safety regime being ushered in by the Building Safety Act, although not for historic liabilities.
The RIBA's President Simon Allford responded to the ARB's announcement last week: "The proposals to hold coverage for certain claims on an aggregate basis and only cover direct losses assumes that all practices can secure limited fire safety cover at present, which is not necessarily the case."
"We have a Council working group on PII, led by Jennifer Dixon, which is looking for solutions to this difficult issue. We will be responding to the consultation, and we urge our members to do the same. We must get this right, or else we risk forcing smaller practices into closure or moving to the unregulated sector.”
The RIBA offers on-demand CPD on How to navigate PII through difficult market conditions.
Thanks to John Winter, Financial Lines Specialist, Apex Insurance Brokers.
Text by Neal Morris. This is a Professional Feature edited by the RIBA Practice team. Send us your feedback and ideas
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First published Thursday 26 May 2022
