S.I. 9 and Insurance | Better Latent than never?
by Bregs Blog admin team
S.I.9 and Insurance | Better Latent than Never?
One of the key criticisms of S.I. 9 is that it affords no better protection to the consumer who may encounter a difficulty with a building project. Building owners still have no recourse other than to pursue the professionals responsible through the Courts with no guarantee of success, which is both costly and time-consuming.
This process will be made even more difficult if the new role of Assigned Certifier does not have adequate Professional Indemnity (PI) insurance in place. Although a recommendation , PI insurance is not mandatory under S.I.9. There are two measures being proposed to try and tackle these situations and these are:
1. Latent Defects Insurance:
Latent Defects Insurance (LDI) is a form of insurance taken out for new-build premises to provide cover in the event of an inherent defect in the design, workmanship or materials becoming apparent after completion. It offers a fairly straightforward and affordable means of redress for the building owner and it would be commonplace for new construction in many EU states. It was originally a central requirement for the stakeholder groups negotiating S.I. 9 with the Department of the Environment but it was not made mandatory when S.I. 9 legislation was introduced.
It appears that there is very little interest in the insurance market either nationally or within the EU at present to provide such insurance to the Irish construction sector. However it is not a panacea for every likely problem with S.I. 9 which includes the following issues:
– Insurers do not provide cover for every eventuality e.g. HomeBond insurance and the pyrite problem.
– Insurers would require independent inspections of design and construction.
2. Professional Indemnity Insurance for Employees:
A further insurance problem has arisen with S.I. 9 in the event that an employee, who acted as an Assigned Certifier , leaves their employment or where the company that employed them goes bankrupt or winds-down. Where an Assigned Certifier employee finds themselves, for whatever reason, not covered by their employer’s Professional Indemnity policy they will be held personally liable for any loss or damage incurred for buildings where they acted as certifier. The tern for this is “employee’s liability overhang” and for this reason most certifiers will be principals or owners of companies, not employees.
It appears that the professional bodies are examining an insurance product for their members who are employees and act as Assigned Certifiers in such cases. However such a scheme comes with many concerns:
- Once you had a policy you would have to maintain the cover until run-off after retirement;
- If the PI insurance was linked to professional membership Assigned Certifiers would also be obliged to maintain their membership of the professional organisation until run-off after retirement;
- The system would be funded by a levy on membership which is likely to be challenged by those members who do not wish to take on the roles of Design or Assigned Certifier
- As the system is based on cover for employees it is likely to be challenged by those members who are sole traders
- Such insurance policies would have to be held by the professional groups involved and this would expose them (and all their memberships) to enormous risk in the event of substantial claims.
While the proposed insurance products would prove attractive to the professional organisations as potential revenue streams and guarantees of continued membership the last point would suggest that it is inappropriate and potentially reckless for membership organisations to involve themselves in commercial activities such as latent defects insurance and insurance policies generally for the wider market.
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