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Consultants face indemnity chaos

PROFESSIONAL INDEMNITY policies could be rendered invalid by new legislation due to come into force on 1 May, the Association of Consulting Engineers has warned.

Adjudication procedures contained in the Construction Act have led the ACE to advise members to check that their cover is still valid in the event of a decision going against them.

ACE director of legal affairs Francis Patterson said that although those working for firms in the ACEs own insurance scheme run by Griffiths & Armour were safe, those outside could find their brokers walking away from claims.

The rest of the market is not happy and is still assessing the situation, she warned. Many have not yet confirmed that they will be giving full cover after adjudication.

Quick fix adjudication procedures are at the core of the new legislation, aimed at settling contractual disputes within 28 days. The problem stems from the fact that adjudication unless specified in the contract is not legally binding and final.

There are still mixed views in the industry, but some brokers have suggested they will be looking very carefully at policies to check what cover they provide in the wake of adjudication decisions. Marsh & McLennan director Peter Sharpe said that brokers were not looking to pay liabilities that were not covered.

The debate centres on whether the 28 day period leaves enough time to establish legal liability and to be sure that the adjudication decision actually establishes a breach in professional integrity.

Willis Faber & Dumas executive director Peter Ibbetson added that to give time for brokers to appoint lawyers and loss adjusters, they will probably want to know immediately if clients get involved with adjudication decisions.

What insurers will be entitled to expect is that consultants have procedures in place to notify insurers as soon as things happen, said Ibbetson. It would be prudent for consultants to check with brokers about this notification period.

Antony Oliver

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