The principals' clause: what an indemnity to principals means in your PI policy
Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-05
If a client has asked you to include a "principals' clause", an "indemnity to principals" or "principal's indemnity" in your professional indemnity (PI) cover, they are asking for a specific extension to your policy. It is common in construction, engineering, IT and consultancy contracts. This page explains what you are actually agreeing to, what it does and does not cover, and what to check before you sign.
What a principals' clause actually does
Under a standard PI policy, your insurer indemnifies you for a civil liability claim arising from a negligent act, error or omission in your professional work. A principals' clause widens that so the same protection also responds where a claim is made against your principal (typically the client or main contractor who engaged you) because of something you did wrong.
Put simply: if your negligence causes a loss, and a third party pursues the principal instead of (or as well as) you, the extension lets the policy indemnify the principal to the extent the liability arose from your work. It stops your client being left exposed for a mistake that was yours, not theirs.
The critical boundary is this: the clause only covers liability arising out of the insured's performance. It never turns your policy into insurance for the principal's own acts, designs or decisions. Their own negligence remains their own problem.
Why clients ask for it
A principal wants certainty that if you make a professional error, there is a policy that responds and they are not left chasing a small business with no assets. Requiring a principals' indemnity in the appointment or subcontract achieves three things for them:
- It ring-fences your negligence within your insurance rather than theirs.
- It gives them a route to recovery without a separate legal fight over apportionment.
- It protects their claims record and PI premiums from being dragged into a matter that was your fault.
Because it is standard practice, most UK PI wordings already grant an indemnity to principals automatically, so meeting the request is usually straightforward — but not always. The detail matters.
Principals' clause vs related requests
Clients often bundle several insurance requirements together and the language overlaps. These are genuinely different asks:
| Request | What it means |
|---|---|
| Indemnity to principals | Policy also indemnifies the principal for liability caused by your negligence. |
| Noting an interest | Recording the principal's name on the policy. On a liability policy this often adds little and insurers may decline. |
| Waiver of subrogation | Your insurer agrees not to pursue a recovery against the principal after paying a claim. |
| Additional insured | A US-style term rarely used on UK PI. The principals' clause is the UK equivalent for professional liability. |
| Maintain PI for a set limit/term | A separate obligation to hold, e.g., £1m, £2m or £5m of cover for a number of years after completion. |
If your contract asks for more than one of these, treat each on its own terms — agreeing to a principals' clause does not automatically satisfy a subrogation waiver or a run-off requirement.
Need PI cover that meets a client's principals' clause requirement? We check the wording against your contract before you sign.
Get a PI quote →What the clause does not do
Consultants sometimes assume this extension is a blank cheque for the client. It is not. Typically it will not:
- Cover the principal's own negligence, design errors or decisions.
- Increase your limit of indemnity — the principal shares the same limit as you, so a large claim can erode the cover available to you.
- Waive the policy excess — the deductible still applies to any settlement.
- Give the principal a direct right to run the claim; conduct usually stays with you and your insurer.
- Respond outside the policy's normal exclusions, geographical and jurisdictional limits.
Because the principal draws on your limit, aggressive contracts that require a principals' indemnity and a high limit for many years can meaningfully affect your exposure. That is a reason to read the appointment carefully rather than signing on trust.
What to check before you agree
Before you confirm to a client that your PI includes a principals' clause, run through these points — ideally with your broker:
- Is it already in your wording? Ask your insurer to confirm in writing rather than assuming.
- Does the wording match the contract? Some appointments demand specific phrasing; a mismatch can put you in breach.
- Limit and aggregation. Check whether the limit is "each and every claim" or "in the aggregate", because a shared limit with the principal matters more when it aggregates.
- Run-off. If the contract wants the indemnity maintained for years after completion, confirm you can keep cover in force — PI is written on a claims-made basis, so lapsing it removes protection for past work.
- Onerous contract terms. Fitness-for-purpose duties, uncapped liability or net-contribution exclusions can sit outside what PI insurers will back. Flag these early.
If anything in the appointment looks broader than your policy responds to, tell us before you sign — start a PI quote here and we will review the requirement alongside the cover.
Common questions
Does a principals' clause cost extra?
Usually not. Most UK professional indemnity wordings include an indemnity to principals as standard, so meeting a client's request is often a matter of confirming it is present rather than paying an additional premium. Always get the confirmation in writing.
Is a principals' clause the same as naming the client on my policy?
No. Naming or "noting" a client records their interest but does not, by itself, give them the benefit of an indemnity. The principals' clause is the mechanism that lets the policy respond on their behalf for liability caused by your negligence. They are separate requests and should each be addressed.
Can the client claim on my policy for their own mistake?
No. The extension only responds to liability arising from your professional work. The principal's own negligent acts, designs or decisions are not covered by your PI policy and remain their responsibility.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for your policy wording.