For many construction contractors, the most serious insurance gap is not hidden in a difficult claims form or an unusual exclusion. It is sitting in the contract that was signed at the start of the project.
That is the practical warning from Louis Foscolo, construction and professional indemnity partner at Kennedys, in a recent Insurance Business UK interview. His central point is one that contractors in Essex, Kent and London should take seriously: liability is increasingly spread across the supply chain, but the party carrying the risk does not always realise it has accepted it.
At the same time, the builder’s risk market is softening. The Amwins H1 2026 market report describes one of the most competitive builder’s risk markets in recent memory, with capacity outpacing demand and rate reductions commonly ranging from 15% to 30% for suitable risks.
That sounds positive, and it is an opportunity. But a lower premium does not repair a policy wording that does not respond to the liability your contract has created.
Design responsibility is no longer limited to architects
Professional indemnity insurance was traditionally associated with architects, engineers, surveyors and other recognised design professionals. Many builders therefore assumed that PI was not relevant to them, particularly where they were installing, manufacturing or constructing from someone else’s drawings.
Design-and-build contracting has changed that position.
A contractor may accept responsibility for design coordination, specifications, calculations, performance, compliance or fitness for purpose without describing itself as a designer. The obligation may appear in a standard form contract, a schedule of amendments or a flow-down clause from the main contractor.
Foscolo gave a useful example in the Insurance Business interview. He spoke to a contractor that was adamant it had no design liability because it was “just fabricating a tank”. The contract, however, said otherwise. The business had accepted design responsibility, creating a PI exposure without holding PI cover.
This is not an unusual problem. A specialist fabricator, installer or general contractor can gradually move from building to designing without noticing the point at which the insurance requirements change.
That is why it is worth revisiting our earlier guide on the design creep trap in general contractor liability insurance. The wording of the contract matters more than the label the business uses for itself.
The wording trap: negligence versus civil liability
Once a contractor accepts design or professional obligations, the next question is whether its PI policy is broad enough to respond.
This is where the difference between a negligence wording and a civil liability wording becomes important.
A negligence-based PI policy generally responds to negligent acts, errors or omissions. It can be suitable for some businesses, and it is often cheaper. However, it may not respond to every contractual liability, warranty or obligation that does not depend on proving negligence.
A civil liability wording is generally broader. Depending on the exact policy terms, it may respond to a wider range of civil liabilities arising from the insured’s professional activities, including certain contractual or statutory duties.
The important point is not that one wording is automatically right for every contractor. It is that the decision should be made after reviewing the work and the contracts, rather than by selecting the cheapest quotation.
In practice, I still see insurance discussions start and finish with the premium. That is understandable when construction margins are under pressure, but it can be a false economy. A 10% saving is not useful if the policy only covers negligence while the contract imposes a wider obligation.
Contractors should ask:
- Does the policy cover civil liability or only negligence?
- Does it cover design undertaken by employees, subcontractors or appointed consultants?
- Are contractual liabilities covered, and if so, which ones?
- Is there a fitness-for-purpose exclusion?
- Does the policy respond to design coordination and specification work?
- Are historic projects covered by an appropriate retroactive date?
- Is the limit sufficient for the contracts being accepted?
These are broker-client conversations, not simply quotation comparisons.
Why joint-names CAR is not a complete safety net
Another common assumption is that a joint-names construction all-risks policy covers “anything that goes wrong” on a project.
It does not.
A construction all-risks, or CAR, policy is primarily designed to cover physical loss or damage to the works and associated project exposures, subject to its terms, conditions and exclusions. It is not a substitute for professional indemnity, public liability or employers’ liability insurance.
Recent court decisions have also narrowed how broadly joint-names CAR cover should be understood. Contractors cannot assume that because their name appears on a project policy, every defect, delay, design issue or liability claim will be absorbed by that policy.
A design error may lead to physical damage, but that does not automatically mean the design liability itself is covered. The policy may also exclude defective design while providing limited cover for resulting damage, depending on the wording.
That distinction can become particularly difficult where the main contractor, developer, consultants and subcontractors all carry different policies and each party believes another policy will respond.
The result is often a dispute after the event, when everyone is trying to establish what was insured rather than dealing with the original problem.
The Building Safety Act creates a long tail
The Building Safety Act has made historic construction risk more relevant to current insurance decisions.
For certain building defects, the legislation has extended potential limitation periods significantly, including claims reaching up to 30 years retrospectively for relevant work. The precise application depends on the facts, the type of claim and the legal route being used, so contractors should obtain legal advice on a specific dispute.
The insurance implication is more straightforward: closing a project does not necessarily mean the risk has disappeared.
Foscolo highlighted the Ardmore case as an example of the courts’ unwillingness to allow companies to avoid fire-safety and building-regulation liability simply by winding up the entity involved. In the wider Building Safety Act environment, associated companies and historic project structures may not provide the protection that some businesses expected.
For contractors, this reinforces the need to maintain records, understand retroactive cover and consider run-off arrangements where appropriate. It also means that a business should not assume its current turnover tells the full story of its insurance exposure. Past work can remain relevant for many years.
A softer market is the right time to review, not cut corners
The builder’s risk market is currently favourable for many buyers. Amwins reports abundant capacity in domestic and London markets, with insurers competing for fewer construction projects and offering reductions, broader terms and greater flexibility in some areas.
Professional indemnity pricing has also eased for well-performing contractors. Construction News reported on 3 August 2026 that PI premiums had fallen by around 15% to 20% for some contractors and consultants, depending on claims history, risk profile and insurer appetite.
That is a good reason to review your insurance programme. It is not a reason to reduce cover without checking the wording.
When capacity is chasing fewer projects, contractors may be tempted to trade on price, accept wider contractual obligations or take on work outside their traditional scope. This is exactly when cover gaps can develop. A business may win a contract with a lower insurance cost but accept a liability it cannot fund if something goes wrong.
Price competition should be used to improve the programme, perhaps by:
- negotiating a broader PI wording;
- reviewing limits and excesses;
- removing restrictions introduced during the hard market;
- checking design and coordination extensions;
- confirming suitable cover for historic work;
- strengthening subcontractor insurance requirements; and
- making sure CAR, liability and PI policies work together.
Contractor checklist for 2026
Before accepting or renewing a construction contract, review the following:
-
Read the design obligations
Look for responsibilities covering design, coordination, calculations, specifications, approvals, performance or fitness for purpose. -
Compare the contract with the PI wording
Do not rely on the policy schedule alone. The operative wording and exclusions determine the real protection. -
Understand negligence versus civil liability
Ask what would happen if a claim alleges breach of contract or statutory duty without proving negligence. -
Do not rely on joint-names CAR alone
Confirm which policy responds to physical damage, delay, defective design and third-party liability. -
Review subcontractor flow-down provisions
Check whether subcontractors are accepting the same design and liability obligations as the main contractor, and obtain evidence of suitable insurance. -
Consider project-specific PI for major schemes
A single project PI policy can work in theory by covering the whole design chain. It has been used on major Middle East projects, although cost has limited its use in the UK. For a particularly large or complex project, it may still be worth exploring. -
Document decisions and communications
Keep contracts, drawings, design instructions, approvals, variations, meeting notes and insurance certificates. Good records can be critical years after completion.
The construction industry can often predict how a project might fail. The harder task is allocating responsibility across a fragmented contractual chain. Contractors should therefore treat PI as part of contract planning, not an optional extra added after the work has already been agreed.
If you operate as a general contractor, specialist fabricator, installer or design-and-build contractor in Essex, Kent or London, contact Moyak Insurance Services to review your Construction Contractor Insurance and General Contractor Liability Insurance requirements. We take an individual approach, review the work you actually undertake and work with leading UK insurance brokers to help secure suitable cover for your budget and contractual obligations.
This article is for general guidance only and does not constitute legal advice or a guarantee of cover. Insurance policies differ, and the terms, conditions, exclusions and limits of the policy will determine whether a claim is covered.
Frequently asked questions
Do construction contractors really need professional indemnity insurance?
Not every contractor needs PI, but it becomes important when the business accepts design, specification, consultancy, coordination or other professional responsibilities. A contractor can assume these duties through its contract even if it does not describe itself as a designer.
What is the difference between PI and CAR insurance?
Professional indemnity generally addresses claims arising from professional services, including certain design errors or omissions. CAR insurance is primarily intended to cover physical loss or damage to construction works during a project. Neither policy should automatically be treated as a replacement for the other.
Is a negligence PI policy enough for a design-and-build contractor?
It may be, depending on the contract and the policy wording, but negligence cover is generally narrower than a civil liability wording. A broker should compare the obligations being accepted with the policy’s insuring clause and exclusions before recommending a structure.
Does the Building Safety Act affect old construction projects?
It can. Certain Building Safety Act provisions allow relevant claims involving historic defects to reach back up to 30 years, subject to the specific legal requirements. Contractors should keep historic project records and discuss retroactive and run-off arrangements with their broker.
Are PI premiums falling for UK contractors in 2026?
Some well-performing contractors and consultants have seen reductions of around 15% to 20%, according to Construction News reporting based on the 2026 market update. The outcome depends on claims history, activities, contract terms, fire-safety exposure and the insurer’s appetite.
Can Moyak arrange insurance for contractors in Essex, Kent and London?
Moyak Insurance Services is a business insurance broker serving clients across Essex, Kent, London and the wider UK. Contractors can contact Moyak to discuss their specific trade, contracts, liability limits and professional indemnity requirements.