This case study is an anonymised composite based on publicly reported PI claim patterns. It is not actual Apex client data and does not constitute legal or insurance advice. Names, locations and identifying details have been changed. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.
A specialist ERP implementation consultancy with thirty staff in two offices, fee income around £6.8m, focused on mid-market manufacturing and distribution clients implementing tier-2 ERP platforms. The firm operated a relatively standardised implementation methodology and was a certified delivery partner for its principal platform vendor.
The engagement was an ERP implementation for a mid-market manufacturing client. The scope included core finance, supply chain, manufacturing and warehouse modules, with integrations to the client’s existing CRM and e-commerce platforms. The contract was a fixed-price engagement structured against a defined scope and a 14-month implementation timeline, with the firm’s standard terms including limitation of liability provisions, an exit framework, and a structured change-control mechanism.
The project ran into difficulty at approximately Month 9, when business process design discovered that the client’s actual manufacturing processes — particularly in respect of a specialist make-to-order production line representing approximately 18% of the client’s revenue — were materially more complex than the discovery and scoping work at the engagement start had captured. The platform’s standard configuration did not accommodate the process; substantial customisation was required.
The firm proposed a change request to address the customisation, with associated time and cost implications. The client disputed the change request on the basis that the original scoping work had been the firm’s responsibility and had been inadequate. The dispute escalated. Negotiations on the change request became protracted; in the meantime, the project continued on the original timeline and the firm’s resources were stretched across the work that had been agreed and the work that was being disputed.
At approximately Month 13, the client terminated the contract on grounds of repudiatory breach by the firm — primarily citing the firm’s failure to deliver to the original scope and timeline, with a secondary argument about the firm’s professional services in respect of the discovery and scoping work. The client engaged a different implementer to complete the implementation. The replacement implementer’s costs and the consequent extended go-live timeline produced substantial additional client expenditure.
The client’s claim against the firm was framed as breach of contract (failure to deliver to scope and timeline) and breach of duty in respect of professional services (the discovery and scoping work). The pleaded loss was the additional cost of completing the implementation through the replacement implementer (approximately £2.1m), the cost of the client’s internal resource extended over the additional period (approximately £620,000), and consequential losses including delayed realisation of the implementation benefits.
The defence engaged a careful analysis of the contractual framework. First, the firm’s terms contained a limitation of liability clause capping the firm’s liability at the fees paid under the engagement (approximately £1.8m). The enforceability of the cap under Unfair Contract Terms Act 1977 principles was the central live issue. The leading case Watford Electronics v Sanderson CFL [2001] EWCA Civ 317 and the line of authorities on B2B limitation clauses provided the framework. Second, the firm’s discovery and scoping work had been undertaken as a professional service against an agreed scoping methodology — the question was whether the scoping had been negligent or whether the manufacturing process complexity was an ordinary risk of any implementation. Third, the client’s termination as a repudiatory breach engaged the Hadley v Baxendale remoteness framework on consequential losses.
The matter ran for substantial time through pre-action correspondence, mediation and a contested costs management hearing before settling at approximately £1.65m inclusive of the client’s costs — at the contractual cap, on a confidential without-prejudice basis that did not resolve the cap-enforceability question definitively.
Section 5 notification was made on receipt of the client’s termination letter. The wording responded subject to the firm’s £50,000 each-and-every excess. The £5m limit was relevant.
A coverage question arose on the contractual cap as a defence within the wording. The wording responded to the firm’s liability for losses arising from professional negligence; the firm’s liability to the client was limited by the contractual cap, and the wording responded to the firm’s actual liability — which was the capped figure. The £5m limit was untroubled.
A second question arose on the delay treatment. The wording typically responds to losses arising from professional negligence but may exclude or sub-limit certain heads of consequential loss; the firm’s wording responded broadly to the client’s losses without an exclusion that engaged on the facts.
A third question arose on the contractual liability assumed exclusion. Some IT PI wordings exclude liability assumed under contract beyond the liability that would arise in tort. The firm’s wording did not contain such an exclusion in onerous form; the matter was managed within the standard cover.
The matter settled at approximately £1.65m inclusive of the client’s contribution to costs. The £50,000 excess applied.
The settlement was paid. The firm undertook a structured review of its discovery and scoping methodology — the principal change being a more rigorous business process discovery phase with documented sign-off by the client at multiple checkpoints and a clearer treatment of complex production processes as a structured risk on the engagement. The firm’s PI premium rose by approximately 38% at the next renewal.
The firm continues to trade and to undertake similar work, but has materially refined its engagement model on similar profile clients.
ERP and complex implementation claims are the highest-quantum single category of IT consulting PI claims. First, the discovery and scoping phase carries disproportionate professional services risk; the file should evidence the methodology, the client’s sign-off and the explicit treatment of complex business processes. Second, the firm’s contractual limitation of liability clause is the single most important risk-management instrument in the engagement; the enforceability under UCTA 1977 principles depends on careful drafting and clear negotiation evidence. Third, the firm’s PI wording’s treatment of contractual liability, consequential loss and contractual cap defences is the substance of the renewal conversation. Fourth, the change-control mechanism in the engagement contract is the second most important risk-management instrument; the firm’s process for raising and concluding change requests should be disciplined and contractually anchored. Fifth, the renewal narrative on the firm’s discovery methodology and the client-engagement model is the substance of the IT consulting underwriter’s view.
For IT consulting practices the wording analysis at renewal is the single most important conversation — particularly on contractual cap defences, consequential loss treatment and the contractual liability assumed exclusion. We work with practices on the engagement-contract template that aligns with the wording’s response. On notification, the framing of an implementation dispute as a professional negligence matter (within cover) rather than a pure contract dispute (potentially outside cover) requires care. At renewal, the firm’s revised discovery methodology and the documented change-control discipline are the documents that earn the underwriter’s confidence.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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