Ask who is liable when a modern construction project goes wrong, and the honest answer is often: it depends who you ask. That, broadly, is the view from Kennedys' construction and professional indemnity team, where partner Louis Foscolo says that where liability actually sits on a project rarely lines up with where the contracts say it should.
"We are seeing that liability is increasingly diffused across the supply chain, and it makes it very difficult to identify who you're really going after or defending," Foscolo said. He pointed to the Building Safety Act's duty holder regime as a regulatory attempt to address exactly that problem, an effort to preserve a "golden thread" of information and accountability as more parties and layers of subcontracting are added to a project.
Professional indemnity was once assumed to be something architects and engineers needed, not builders. That assumption no longer holds, Foscolo said, and the reason traces back to a specific shift in how projects are procured.
Design-and-build contracting has pushed design obligations onto parties who don't always realise they've taken them on. Foscolo described a call earlier that same day with a contractor adamant it carried no design liability, because it was "just fabricating a tank", only for its own contract to say otherwise. "All of a sudden this company has got a PI exposure without any PI cover, because they weren't aware that they were taking on those liabilities," he said.
The distinction between a civil liability wording and a negligence wording in a PI policy, can create a trap which he said has caught out contractors over the last 10 to 15 years, and has "created a bit of a state of flux." The clearer point, he said, is on price: negligence wordings typically carry a lower premium than the broader civil liability version, though with narrower protection, which he said makes it a matter brokers need to walk clients through carefully rather than default on price alone.
One fix exists in theory: a single project-specific PI policy covering an entire scheme, making a defect the insurer's problem rather than a multi-party dispute over whose design failed. Foscolo has seen it work on large projects in the Middle East, but said it has never taken off in the UK, which could be attributed to cost, since the premium would have to be funded further up the chain, by the developer.
Foscolo pointed to the Building Safety Act as the area most commonly underestimated, particularly its long retrospective reach, liability can be pursued up to 30 years back. He referenced the recent Ardmore case as evidence that courts are unwilling to let companies avoid fire safety and building regulation liabilities by winding up the part of the business responsible for them.
He also flagged a common assumption among contractors that a joint-names construction all-risks policy covers "anything that goes wrong" on a project, an assumption the courts have narrowed in a run of recent cases. "There's that underestimation of, oh, it's all fine and I'm covered," Foscolo said. "And then when push comes to shove, everyone's scrabbling around to check what their insurance actually covers, because they might not be all in harmony."
Asked directly whether construction liability is becoming harder to predict or harder to allocate as UK projects grow more complex, Foscolo was unequivocal that it's the latter. "The legal, technical risks are broadly foreseeable," he said. "We know how things go wrong and why they go wrong, and the legal ramifications. But allocating that across increasingly fragmented contractual chain is incredibly difficult."
That distinction matters for how the PI market prices and structures cover for construction risk. The failure modes themselves - diffused design responsibility, policy wordings that don't match what's actually being built, and gaps between what contractors assume is covered and what a joint-names policy actually pays out, are already familiar territory to the market. The harder question is contractual: whose name ends up on the claim, and whether the PI cover in place ever matched the design responsibility that was actually being carried.
