Reasonable skill and care 

Does the contract impose a duty on the firm to perform services to a higher standard than the level expected of another reasonably competent member of the profession? An example of a higher duty would be a ‘fitness for purpose’ obligation.

Miller insight: Most standard PI policies will include within them a ‘contractual liability clause’, which looks to exclude claims arising from contractual terms that have been entered into where the insured gives warranties or guarantees that go beyond the normal standard of contractual performance.

Limit of liability requirements 

Does the contract explicitly state that you must maintain a specific level of PI insurance over a pre-determined time period? For example, must maintain GBP10,000,000 in the aggregate for 12 years after completion of the project.

Miller insight: In the UK, PI insurance is underwritten on a claims made basis, which means that the insurance policy in force at the time a claim is made will be the policy that responds to the claim. It is key to note that where most PI policies are annually renewable and market conditions can change, the cost and availability of cover can fluctuate. If you can only achieve a reduced limit at renewal, this will have an impact on the level of cover available for claims arising from previous years, regardless of the level of cover you had at that time.

Liquidated damages

Does the contract stipulate pre-agreed compensation for the failure or delay in delivering any element of your duties? 

Miller insight: PI policies will usually include an exclusion for liquidated damages payments that are deemed to go beyond the liability that will otherwise have existed at law with the absence of this contract. Insureds should ensure that a liquidated damages clause is set at an amount that is a genuine pre-estimate of any loss. In doing so, it will reduce the chances for disputes from insurers where they claim this would fall outside of the scope of your PI policy.