Yes, builders absolutely need PI (Professional Indemnity) insurance, especially in today’s construction environment where design responsibility is often pushed onto the builder, even if outsourced.

PI insurance protects builders when a client alleges financial loss due to:

• Incorrect design
• Incorrect advice
• Documentation errors
• Certification mistakes
• Non-compliance with codes or standards

Even if you don’t provide design services yourself, you can still be held liable if something goes wrong with a subcontracted design.

What Is PI Insurance?

Professional Indemnity insurance protects against claims made for professional negligence, any error or omission in the advice, documentation, or design supplied by the builder or their contractors.

PI covers:

• Legal defence costs
• Compensation or settlement payments
• Rectification costs (if included in the wording)
• Court attendance costs
• Claims arising from subcontracted design (if declared)

For builders, this includes design reviews, drafting, coordination, and certification obligations.

What Is Design and Construction (D&C) Insurance?

Design & Construct PI insurance is a specialised form of PI designed specifically for businesses that both design and build, or are responsible for managing the design process.

It covers:

• In-house design
• Outsourced design (architects, engineers, drafting contractors)
• Design management + coordination
• BIM / digital modelling exposures
• Specification and documentation risks

D&C liability is now extremely common in modern construction contracts.

What’s the Difference Between PI and D&C Insurance?

Standard PI Insurance	Design & Construct (D&C) PI Insurance
Covers pure advice only	Covers advice and construction
Intended for consultants	Tailored for builders & contractors
Limited cover for subcontractors	Designed to cover subcontracted design
Minimal construction coverage	Covers both design + construction obligations

If you sign D&C contracts, standard PI is usually not enough.

What Are the Upcoming Rules About It in Australia?

Australia is tightening its stance on design liability due to building quality problems (combustible cladding, structural issues, NCC compliance failures).

Key developments include:

1. Expansion of the Duty of Care (NSW)

Under the Design & Building Practitioners Act, builders can be held liable for:

• Design defects
• Inadequate documentation

Other states are considering similar frameworks.

2. Increased Accountability for Documentation

Builders must ensure:

• All drawings are current
• Design coordination is managed
• Certifications are correct
• Consultants have adequate PI insurance

Poor design documentation is now a major risk factor.

3. Stricter Insurance Requirements

Insurers are imposing:

• Lower limits
• Higher excesses
• More exclusions
• Tighter underwriting scrutiny

D&C builders especially face difficulty obtaining PI without strong risk controls.

What Exposures Do Builders Have?

Builders face professional exposures (design-related) and operational exposures (physical works).

Design & Construct Exposures:

• Incorrect plans, documentation, or specifications
• Misinterpretation of design intent
• Coordination failures between contractors
• Certification or compliance errors
• BIM modelling liability
• Incorrect product selection
• Scope creep or undocumented variations

These exposures are NOT covered by public liability insurance or contract works insurance.

Why You Could Be Liable for Your Contractors’ Errors

Even when the design is fully subcontracted, the builder is usually the principal contractor under contract law meaning:

• The client sues the builder, not each subcontractor individually.
• The builder must pursue the subcontractor for recovery.
• If the subcontractor’s PI insurance is inadequate or expired, the builder bears the cost.
• Contracts increasingly make the builder responsible for design coordination and compliance.

If your contract says you’re responsible for “design management,” you inherit the full design risk.

How to Get PI Insurance

To obtain PI insurance, insurers will require:

• A completed PI proposal form
• Details about D&C activities
• Revenue breakdown
• Contractual responsibility information
• Claims history
• Copies of any standard contracts used
• Risk management procedures
• Details of subcontracted consultants

A construction insurance broker can package this properly to avoid unnecessary exclusions.

What PI Insurance Can Exclude

PI exclusions vary, but common (and dangerous) ones include:

• Faulty workmanship
• Contractual liability beyond negligence
• Fitness for purpose obligations
• Cladding / structural defects
• Subcontractor design not declared
• Non-compliant documentation
• Cost overruns or delays
• Known defects / prior circumstances
• Joint venture liabilities

Many builders discover exclusions after a claim, when it’s too late.

Why You Need a Construction Insurance Broker

Construction PI, especially D&C PI, is complex. A specialist broker will:

• Identify risky clauses in your contracts
• Negotiate with insurers to remove harsh exclusions
• Ensure subcontractor PI is adequate
• Compare multiple PI and D&C policies
• Advise on limits appropriate for your project values
• Help prepare insurer-friendly risk documentation
• Handle claims swiftly

Without a construction insurance broker, builders often end up with incomplete or dangerous PI cover.

Why Use Morgan Insurance Brokers

Morgan Insurance Brokers specialises in construction & design liability, offering:

• Access to leading PI + D&C insurers
• Guidance through difficult underwriting questions
• Tailored policy structures
• Removal of unnecessary exclusions
• Advice on design responsibility in contracts
• Personalised support throughout claims
• Strong relationships with insurers for better outcomes

Builders face real design liability, and Morgan Insurance Brokers ensures you’re properly protected from both professional and construction risk.