Architect's PI: claims-made cover, retroactive date and aggregation
A small architecture practice has a professional indemnity policy on a claims-made basis. The retroactive date is 1 January 2018; the limit is £1m each and every claim, £2m in the aggregate; the policy requires written notification of circumstances 'immediately'. In March 2024 a contractor writes alleging defective roof design on a project completed in 2019, causing leaks and £700,000 of remedial cost. The principal mentions it to the broker in April but does not put it in writing. In June 2024 the employer issues a formal claim. In May 2024 a different client claims £300,000 for the same design detail on a project completed in 2017. The policy renews on 1 July 2024. The practice has no other insurance. The principal asks whether both claims are covered and whether they can be treated as one claim. The insurer has not yet appointed solicitors.
1. Explain whether each claim is covered, applying the claims-made basis and the retroactive date.
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Claims-made basis. The policy responds to claims first made against the insured, or circumstances notified, during the policy period. It does not respond simply because the negligent work was done during the period. The relevant policy is therefore the one in force when the claim is made or the circumstance is notified.
2019 project claim. The contractor's letter in March 2024 is a circumstance, and the formal claim in June 2024 is made before the 1 July 2024 renewal. The project was completed in 2019, after the 1 January 2018 retroactive date. Subject to the policy terms, exclusions and the notification condition, this claim is covered.
2017 project claim. The May 2024 claim relates to a project completed in 2017, before the retroactive date. There is no cover under this policy for that project unless the policy has a special extension or the insured had earlier insurance with an earlier retroactive date. The fact that the design detail is the same does not bring the 2017 work within the retroactive date.
Limit. The 2019 claim is subject to the £1m each-and-every-claim limit. The £2m aggregate may be relevant if there are other claims in the period.
2. Advise on the late written notification and the renewal, including prejudice and the risk of losing cover.
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Notification condition. The policy requires written notice immediately. The principal told the broker orally in April but did not write. Whether that is notice depends on the broker's authority and the policy wording. The insurer should ask for the file and the broker's note.
Prejudice. Under the Insurance Act 2015, the insurer must consider the effect of the breach and whether the delay caused prejudice. It should assess whether the delay prevented it from investigating the roof design, appointing solicitors, or settling early. The contractor's letter was known in March, so the insurer may struggle to show serious prejudice. It should reserve rights and investigate.
Renewal risk. If the practice renews on 1 July 2024 without notifying the circumstance in writing, the new policy may exclude known circumstances or the insured may face a gap. The practice should notify the current insurer and disclose the circumstance to the renewal insurer. The broker should confirm cover in writing. The insurer should not simply avoid the policy without a careful prejudice analysis.
3. Can the two claims be aggregated as one claim? Explain the aggregation wording and the implications for the limit.
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Aggregation wording. Aggregation depends on the clause. A common wording treats as one claim all claims arising from one originating cause, or one series of related acts or omissions. The same roof design detail may be one originating cause, which would support aggregation. But if the wording requires related claims or a single project, the two projects may be separate.
Retroactive date problem. The 2017 claim is outside the retroactive date. The insurer should not aggregate an uncovered claim with a covered claim in a way that reduces the limit available for the covered claim. The 2019 claim should be assessed on its own.
Limit implications. If aggregation applies, the two claims may share the £1m each-and-every-claim limit. If they are separate, the 2019 claim has its own £1m limit and the 2017 claim is uninsured. The practice may face a gap for the 2017 claim. The insurer should reserve its rights on aggregation, obtain full details of both projects, and consider whether the same design team, documents and instructions were involved. The insured should be warned not to assume one limit.