PI insurance when your firm uses subcontractors or sub-consultants

Professional firms increasingly deliver work through subcontractors and sub-consultants — associate solicitors, contract architects, freelance IT consultants, associate accountants, specialist engineering sub-consultants. The client-facing firm carries the professional responsibility; the delegated work carries the risk. This page maps how PI responds.

The three party structures

1. Client engages firm; firm engages subcontractor directly. Firm bears the client-facing liability. Subcontractor may or may not have their own PI.
2. Client engages both firm and subcontractor. Each party has direct contractual liability to the client. Multiple PI policies may respond.
3. Firm and subcontractor operate under a formal joint venture or consortium. Structured differently — typically a separate PI arrangement for the JV.

Vicarious and direct liability

1. Vicarious liability — where the subcontractor is treated as an agent or employee of the firm, the firm bears responsibility for their acts.
2. Direct liability — where the subcontractor is a genuine independent contractor with the client, the client can pursue them directly.
3. Non-delegable duty — some professional duties (SRA-regulated work for a client, medical treatment) cannot be delegated to escape liability. The delegating professional remains responsible.
4. Sub-consultant liability — in construction, the lead consultant typically retains responsibility for co-ordination and integration; sub-consultants for their specific discipline.

How PI wordings handle subcontractors

1. Most PI wordings cover work done by employees as part of the firm's civil liability.
2. Independent contractors and sub-consultants — wording varies. Some wordings extend cover to work delegated by the firm; some restrict; some require named endorsement.
3. Named subcontractors — some wordings require specific subcontractors to be named to be covered.
4. Subcontractor's own PI — separate from the firm's cover, sits alongside.
5. Excess-over-subcontractor arrangements — some sophisticated structures make the firm's PI respond only after the subcontractor's PI has been exhausted.

Contractual protection

1. Require subcontractors to hold their own PI at a defined limit adequate to the work.
2. Written subcontracting agreement allocating liability, indemnity and PI obligations.
3. Right to require certificate of insurance from the subcontractor annually.
4. Net contribution clauses where multiple parties may be liable — limit each party's exposure to their fair share.
5. Novation or step-in rights in construction contracts.

Common pitfalls

1. Firm delegates work without checking subcontractor's PI. If subcontractor is uninsured and firm is vicariously liable, firm bears the loss with only its own PI to respond.
2. Subcontractor's PI limit is much lower than the risk. Firm's cover may need to top up.
3. Named-endorsement requirement missed. Firm's wording required subcontractor to be named; wasn't; cover disputed.
4. Non-delegable duty. Firm delegates but retains legal responsibility — subcontractor's PI may not respond if the client's claim is against the firm.
5. Aggregation. Multiple subcontractor errors on multiple matters may aggregate under one policy limit.

Getting the structure right

1. Identify all subcontractors and sub-consultants used or planned.
2. Confirm each carries adequate PI cover, evidenced by certificate.
3. Update the firm's PI wording at renewal to reflect the subcontractor arrangements.
4. Consider named-endorsement where required by wording.
5. Written subcontracting agreements with clear liability allocation.
6. Regular review of subcontractor cover as the firm's work profile evolves.

Frequently asked

Related reading

• Aggregation clauses by regulator
• Fair presentation under the Insurance Act 2015
• PI cover limit adequacy check
• Notification vs claim in UK PI