Civil Engineering Reference
In-Depth Information
the grantor. In the ordinary course of events, the grantor, to limit their exposure, will
attempt to limit the number of occasions upon which the collateral warranty may be
assigned. Where relevant, both grantor and beneficiary should check the provisions of
the grantor's professional indemnity insurance cover when considering the number
of assignations as most insurers will wish to restrict the permitted number of assig-
nations, especially where the collateral warranty contains few restrictions on liability.
For the reasons described in Section 13.6, an assignation of a collateral warranty
may be of limited value in certain circumstances and a second purchaser or tenant
will often prefer a new warranty in its favour. This is notwithstanding that in
Scottish
Widows Services Limited v Kershaw Mechanical Services Limited and another
(2011)
the Court of Session held that the assignee was entitled to recover under an assigned
collateral warranty.
13.3.8 Professional indemnity insurance
The [Contractor/Sub-Contractor] shall maintain professional indemnity insurance
in an amount of not less than [ ] for every occurrence or series of occurrences
arising out of any one event with insurers of substance and repute in the UK
Insurance Market until [12] years from the date of Practical Completion under
the Building Contract, provided always that such insurance is available to the
[Contractor/Sub-Contractor] at commercially reasonable rates. The [Contractor/
Sub-Contractor] shall immediately inform the Beneficiary if such insurance ceases
to be available at commercially reasonable rates in order that the [Contractor/
Sub-Contractor] and the Beneficiary can discuss the means of best protecting
the respective positions of the Beneficiary and the [Contractor/Sub-Contractor]
in the absence of such insurance. As and when it is reasonably requested to
do so by the Beneficiary, the [Contractor/Sub-Contractor] shall produce for
inspection documentary evidence that its professional indemnity insurance is
being maintained.
The well-advised grantor will, where it maintains professional indemnity insurance
in respect of its obligations in terms of the collateral warranty, refer any collateral
warranty it proposes to enter into to its professional indemnity insurers for com-
ment. Where the grantor has responsibility for design, it will normally be required
to maintain professional indemnity insurance for a number of years after practical
completion. For the same reasons as mentioned in Section 13.3.3, a period of 12 years
would seem to be the norm. Further qualifications to this obligation often include
the requirement for insurance to be available at commercially reasonable rates and on
reasonable terms and conditions.
Itisworthnotingthattherearefew,ifany,insurerspreparedtounderwriteanyform
of absolute risk. Professional indemnity insurance traditionally covers the 'legal liabil-
ity' of the insured, i.e. in the case of a professional, the exercise of reasonable skill and
care.Anyvoluntaryassumptionofagreaterdutybytheinsuredincontractisgenerally
covered by way of an extension to the policy. his can either be a general endorsement
within certain parameters, or require 'approval' of each contract by the insurer.
