Professional Practice Series: Insurance

Aims & Objectives

If you are employed, most employers will cover you for both Professional Indemnity and Public Liability but you should be clear that this is the case and whether the cover provided is appropriate. This guide aims to clarify what insurance is required by interior designers.

Objectives

1. To explain the types of insurance cover available including Professional Indemnity, Public Liability and Product Liability
2. To clarify who should be covered
3. To consider the level of cover required

The need for Insurance

Remember – insurance is only needed when things go wrong. It is protection against the risk of operating as an interior designer and although many risks can be mitigated by effective professional practice, accidents and unforeseen circumstances will always occur.

• Expect the unexpected
• Plan for the worst-case scenario
• Document all your professional practice activity as you go along – retrospective recollection is rarely accurate
• Always read the small print on your policy

What do you Need to Cover ?

Professional Indemnity

Professional Indemnity insurance (PI), provides insurance cover against claims of negligence in the event that a client suffers loss of injury as a result of alleged neglect, error, or omission. It is widely used where professional services are provided to the client by a designer and will provide cover up to a specified insured sum where negligence is proven to have been committed by the designer.

Professional Indemnity in the policy should meet the cost of defending claims of negligence made against it and damages if they are payable, usually subject to the insured party paying the initial excess set out in the policy. In these times of high consumer awareness, clients will not hesitate to pursue a claim if they feel that they have received substandard service. The policy will not usually provide cover against allegations of criminal behaviour, nor against allegations of non-negligent workmanship and such events may require dispute resolution activity.

Public Liability

Public Liability insurance is required to provide cover for the cost of legal action and compensation claims made against you or your employees for injury to third parties or damage to their property, arising out of your or your employee’s negligence whilst on your business.

Maintaining Cover

Insurance coverage must be maintained while practicing as a designer, as claims can only be considered if the policy is still current at the time of the complaint, regardless of when the project took place.

Therefore, a policy running from 1st January 2019, and not renewed on 1st January 2020, would result in any claim first notified in 2018 not being met. However, if the insurance had been transferred to new insurers at the renewal date, they would handle the claim.

How much cover do you need?

The level of cover required will depend on:

What happens when things go wrong?

Dispute Resolution Options

1. Mediation
   This is probably the lowest cost option and takes the form of discussions with a neutral person, They will meet with each party separately and then both parties together to try to find a solution acceptable to both sides. This is not a judgement option but more a facilitation of communication to achieve a mutually acceptable resolution. The mediator does not need to be knowledgeable about the project, just skilful enough to encourage effective communication with both parties. This can also be a relatively quick process with all discussions taking place in a single day.
2. Adjudication
   In adjudication, the impartial adjudicator listens to all the evidence and makes a decision that is legally binding, usually within 28 days. Unlike mediation which tries to find a win-win situation, adjudication will produce a winner and loser which is likely to impact any ongoing relationship. Given the short timescale, it is essential that all record-keeping is up-to-date. The results of adjudication are in the public domain which means the information could be used in other legal claims.

Dispute Resolution Options

1. Arbitration
   Arbitration is similar to adjudication with the exception that it occurs in confidence. This means that any evidence or information cannot be used in further legal action. The results are binding and there is no appeal. This means that it is not possible to then move to litigation after arbitration.
2. Litigation
   Litigation is a last resort option that is usually expensive with the only winner being the lawyers. Preparing for court action is costly and time-consuming and extremely stressful and should be avoided if at all possible.

The BIID Complaints Procedure can be found on the BIID website

The BIID Insurance Benefit

The BIID offers a Professional Indemnity Insurance Scheme to its members, which takes into consideration the broad range of duties and activities undertaken by BIID members. This cover offers members protection for negligent advice, errors, or breach of duty of care – and in some instances, this can be a stipulation from the client.

BIID members are free to choose their own provider for Professional Indemnity Insurance, however, this scheme offers:

• Highly competitive rates, backed by a price promise.
• Cover in a few moments (subject to acceptance) – get a quote in under 3 minutes
• Options for Employers & Public Liability (only available in conjunction with Professional Indemnity)
• Full policy wording and summary located online (Print your own policy document)

Go to the Members Area and filter by Professional Practice Series to find more articles offering support on practicing as an interior designer.