Professional Indemnity Insurance for Subcontractors

Subcontractors face dual liability: to main contractors above and direct clients below. PI requirements and flow-down clauses create unique coverage complexities.

Main Contractor PI Requirements for Subcontractors

Main contractors almost always require subcontractors to carry PI insurance. Contract specifies minimum cover (typically £1m-£5m depending on scope). You'll provide certificate of insurance naming main contractor as 'interested party.' Failure to maintain cover or reduction in cover triggers contract violation. Main contractor can cancel your appointment if cover lapses or becomes inadequate.

Flow-Down Clauses and Liability Assumptions

Subcontract often includes 'flow-down' language: 'Subcontractor assumes liability for all professional negligence.' This extends your liability beyond direct work—if your design defect causes main contractor's liability to their client, you're liable. Your PI must cover this extended liability. Some flow-down clauses are unreasonable (unlimited liability, jurisdiction you can't serve in, regulatory fines). Negotiate before signing; insurers need to know assumed liabilities.

Cover Gaps Between Subcontractor and Main Contractor

Main contractor has their own PI (covers their design). You have PI (covers your design). If there's overlap (both involved in design), disputes arise: 'Whose error was it?' Your policy should cover 'comparative negligence' (shared fault). Some main contractors won't sue you if both are liable; instead, client sues main contractor, main contractor sues you. Ensure your policy covers this chain of liability.

Contractual Indemnity vs. Your Professional Liability

Contract might require: 'You will indemnify the main contractor against all liability.' This is assumed liability (you pay main contractor's legal fees). Your PI covers this but with limits. If indemnity clause exceeds your PI limit, you're personally liable for overage. Never sign indemnity exceeding your insurance limit. Renegotiate contract or increase insurance before signing.

Multiple Subcontractors and Apportionment Risk

Multiple subs working on same project means shared liability risk. If project fails, each subcontractor shares blame. Your PI covers your portion, but clients often sue the 'deepest pocket' (main contractor), who then sues all subs. Having PI doesn't avoid lawsuit; it just covers defense costs and liability. With multiple subs, disputes over fault are common and expensive.

"Subcontractor PI isn't optional—it's the price of main contractor work. Ensure cover matches contractual assumptions."

— Construction Contract Specialist

Frequently Asked Questions