‘You get what you pay for’ – the meaning of ‘professional services’ in D&C policies
The recent case of considered the meaning of ‘professional services’ within a design and construct policy.
Facts of the case
FKP Commercial Developments Pty Limited was the developer of a building project under a contract with FKP Constructions Pty Limited, a head contractor. FKP Constructions used third party consultants and sub-contractors, choosing not to perform any design or construction works itself.
The registered proprietors of the common property and commercial buildings alleged:
- numerous defects and non-complying construction work; and
- losses arising from breaches of the statutory warranties under the Home Building Act 1989 and/or a common law or statutory duty of care.
The FKP parties sought an indemnity for the claim under their ‘Design and Construction Professional Indemnity’ insurance policy. Insurers rejected the claim on the basis that the potential liability did not arise from the provision of ‘professional services’ as defined under the policy.
Judgment
On the question of whether the claim was a ‘claim for civil liability… based on the insured’s provision of professional services’, the court held the claim fell outside the scope of the policy. The court held that FKP’s liability arose from its position as the owner/developer of the property, and not from the provision of professional services.
The court characterised the liability of the FKP parties as wholly based on or arising from the following, which were not covered under the policy:
- Construction, manufacture, assembly, installation, erection, maintenance or physical alteration of buildings, goods, products or property (which are excluded from the definition of ‘Professional Services’); or
- Defects in or lack of suitability of products and goods used in the construction of the common property of the residential building’ (which are excluded under the policy).
Considerations for underwriters
This case serves as a reminder that, in the words of the judge in the case, ‘a party gets the policy they pay for’.
Contents
- The Word, November 2022
- An update on articles in previous editions of the Word
- ‘Final judgment’ or ‘final adjudication’ - what’s the difference?
- Atlanta adopts Plain Numbers to improve policy readability
- Duty to defend - when is it triggered?
- Date of incident or date of coverage decision – when does the cause of action commence?
You may be interested in...
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Navigating workplace sexual harassment laws during the festive season
Opinion
Revolutionising the Workforce: Impact of Get Britain Working White Paper
°ÄÃÅÁùºÏ²Ê×ÊÁÏ - London Market Quarterly
London Market Quarterly December 2024: An eye on what the market needs to know
Published Article
Johnson et al v FirstRand Bank: Judgment sends warning across financial services intermediation
Opinion
Balancing employer flexibility and employee rights
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
The ‘grate’ cheese robbery: Implications for insurance professionals
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Environmental crime and the impact for insurers
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Carbon fraud prompts insurance response
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
What might a Trump victory mean for the UK insurance industry?
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Post Office scandal: Lessons for underwriters
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Weather protection parametric insurance: A sign of things to come?
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Building an inclusive workplace: strategies for attracting and retaining disabled talent
On-Demand
Kinship care: DJ v Barnsley Metropolitan Borough Council and SG
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
After a pause, Buy Now Pay Later (BNPL) regulation becomes one step closer
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Updates to the UK’s Arbitration Bill
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Ozempic: The rising costs and coverage issues of weight loss medication
°ÄÃÅÁùºÏ²Ê×ÊÁÏ - Employment Rights Bill
What does the Employment Rights Bill mean for employment practices liability insurance?
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
ICAEW: Changes to PII requirements
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Contractor insolvency: Peabody Trust v NHBC
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Insurability by design: Increased transparency for vehicle manufacturers and insurers
°ÄÃÅÁùºÏ²Ê×ÊÁÏ - Building Safety Act
The Building Safety Act 2022: Managing risks for private equity investors and acquirers
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
By a narrow 2 to 1 majority, the Court of Appeal finds in favour of insurers in the construction of an exclusion clause in a W&I policy
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Organisational approaches to ESG and sustainability matters
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
LMA binders’ consultation
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Smooth sailing ahead: The LMA's new Open Form Default Clause
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
PFAS: The issue that won’t go away
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Oklahoma earthquake: Racial discrimination in adjudication
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Will the Online Safety Act help reduce Google ad spoofing in insurance?
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Vicarious liability for kinship foster carer abuse: Implications for local authority insurers
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Latest short-term insurance trends
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Motor finance complaints on hold: Why now is the time for strategic action
Published Article
General insurance claims part 3: evidence of the insurance markets’ learnings from the consumer duty
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Artificial intelligence putting the ‘actuarial defence’ to the test?
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Under the influence: France introduces insurance requirement for influencers
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Insuring a summer of sport
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
The impact of UK riots on insurers
°ÄÃÅÁùºÏ²Ê×ÊÁÏ - The Word
The Word, August 2024
°ÄÃÅÁùºÏ²Ê×ÊÁÏ
Product Safety and Metrology Bill: E-bike and e-scooter fires
Opinion
Choose your words wisely: Balancing inclusivity and employees’ beliefs at work
