Written contracts: Civil Liability Act & PI insurance

19 Sep 2014
Certifiers: your professional indemnity insurance may be void if you sign a contract that waives Part 4 of the Civil Liability Act 2002.

Scenario: A large development company prepared a contract for certification services and asked a certifier to sign it. The contract asked the certifier to waive the provisions of Part 4 (related to proportionate liability) of the Civil Liability Act 2002.

The certifier sought independent legal advice and was told that the contract may void the certifier's professional indemnity insurance. A clause in the insurance policy dealt with situations where the certifier waived Part 4 of the Civil Liability Act. If the policy was void, the certifier couldn't work, because certifiers must be insured at all times.

The certifier wisely refused the job, but others may have been tempted to accept.

Understand the risks involved!

  • As with any other business arrangement, only sign a contract if you fully understand each provision and its potential implications.
  • To avoid confusion, all contractual arrangements should be set out in one document which includes everything required under clause 19A of the Building Professionals Regulation 2007.
  • Never accept a job that may breach your insurance policy - it's not worth the risk.
  • Independent legal advice can be expensive. You might refuse a smaller job if the fee you would earn isn't worth the liability.
  • Consider seeking advice from a more experienced certifier or other trusted sources.

How is the Board responding?

The Board's Local Government Reference Group is considering this scenario as it examines the form and content of certifier contracts. The group includes highly experienced consultants, industry and local government representatives. The group's advice will inform the Board's policy direction.

Recent consultation by the Board on the Maltabarow report showed most people want some sort of agreement in place between certifiers and clients.

More information: see our FAQ about written contracts.