Proportionate liability is a basis of legal responsibility under which each defendant pays only the share of the claimant’s loss attributable to that defendant’s own fault. It contrasts with joint-and-several liability, the default English-law position for concurrent wrongdoers. Proportionate liability is not generally available as a matter of law in England and Wales — it usually has to be created by contract, often through a net contribution clause.
What proportionate liability means in PI insurance
In any case with two or more potential wrongdoers — a designer and a contractor, a surveyor and a solicitor, two consultants on the same project — the question arises how the claimant’s loss should be split between them. English law’s default is that each concurrent wrongdoer is liable jointly and severally for the whole loss, with contribution between defendants resolved under the Civil Liability (Contribution) Act 1978. Proportionate liability inverts this: each defendant pays only its own share, the claimant bears the risk of an insolvent or untraced co-defendant, and there is no contribution claim because there is nothing to contribute to.
The distinction matters intensely on PI claims for two reasons:
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Exposure size. Under joint-and-several, a single deep-pocketed defendant can be required to pay the whole loss and then chase contribution from co-defendants. Under proportionate liability, that same defendant pays only its share — typically a much smaller number.
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Insurer recovery position. Insurers paying out under joint-and-several have contribution rights against the insurers of co-defendants, which they pursue through subrogated recoveries. Under proportionate liability, there is no equivalent recovery action because each insurer pays only its insured’s share from the outset.
Proportionate liability is the rule in some Australian states by statute and in parts of the US by statute or judicial doctrine. In England and Wales, it is not the default. It exists in PI practice almost entirely through contractual mechanisms — most commonly the net contribution clause inserted into construction and consultancy appointments.
How proportionate liability works in practice
Where a contract validly imports proportionate liability through a net contribution clause, the typical structure is:
- The professional’s liability to the client is limited to “such proportion of the loss as it would be just and equitable for it to pay, having regard to the extent of its responsibility”.
- The clause directs the court to assume that all other concurrent wrongdoers have paid their share, even if they have not (because they are insolvent, untraced, or settled).
- The professional’s actual cash outlay is its proportionate share — say 30% — rather than the full loss.
Two things must be true for the clause to work in practice:
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The clause is in the relevant contract. A net contribution clause in the engineer’s appointment does not help the architect on the same project unless the architect’s appointment also has one. Each professional needs the clause in its own contract.
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The clause survives contractual interpretation. Net contribution clauses are construed strictly against the party seeking to rely on them and against the background of the Unfair Contract Terms Act 1977 and (for consumer contracts) the Consumer Rights Act 2015. In West v Ian Finlay & Associates [2014] EWCA Civ 316, the Court of Appeal upheld a net contribution clause in a residential architect’s appointment on the facts, but the case is fact-specific.
Where the clause does not apply or fails, English law’s joint-and-several default applies, with contribution sorted out between defendants afterward. The PI policy responds to whatever liability is actually established against the insured.
Worked example: an architect’s net contribution clause
Consider a Bristol architectural practice with £1m of PI cover and a £10,000 excess, engaged on a £4m mixed-use development. A defect emerges in the building envelope. Investigation concludes the loss is £600,000, attributable 40% to the architect’s design oversight and 60% to the contractor’s poor workmanship. The contractor has gone into liquidation.
Without a net contribution clause (joint-and-several default):
- The client sues the architect for the full £600,000.
- The architect is jointly and severally liable for the whole loss.
- The architect’s PI insurer pays £600,000, less the £10,000 excess.
- The insurer brings a contribution claim against the contractor’s insurer under the 1978 Act for 60% — £360,000 — but recovers nothing because the contractor’s policy has been cancelled following liquidation.
- Net insurer outlay: £590,000.
With a valid net contribution clause in the architect’s appointment:
- The client sues the architect for the architect’s share only — £240,000 (40% of £600,000).
- The architect’s PI insurer pays £240,000, less the £10,000 excess.
- The client bears the £360,000 attributable to the contractor and recovers nothing for that share because the contractor is insolvent.
- Net insurer outlay: £230,000.
The figures are illustrative; the structural difference is what matters. The net contribution clause shifts £360,000 of insolvency risk from the architect (and its PI insurer) to the client. Clients, understandably, often resist net contribution clauses on this basis.
When this matters most
Proportionate liability matters most in three situations:
Construction and consultancy projects. Multi-disciplinary teams — architects, engineers, contractors, project managers — create the classic joint-and-several risk. Net contribution clauses are standard in industry-form appointments such as the RIBA and ACE standard agreements precisely because the construction sector understands the exposure.
Surveyor / solicitor combinations on transactions. Where a property transaction goes wrong, both the surveyor and the solicitor may face overlapping allegations. The default joint-and-several rule can leave one professional carrying the full loss; net contribution language in transactional appointments is rarer but increasingly seen on commercial work.
Cross-border work. A UK professional working on a project subject to Australian or US law may find proportionate liability applies by statute in those jurisdictions. The PI policy’s worldwide jurisdiction wording then has to handle a fundamentally different liability regime than the English default. See worldwide jurisdiction.
Common variations and market wording
Net contribution and proportionate liability clauses come in several forms:
- “Just and equitable” net contribution. The standard formulation — liability limited to such proportion as is “just and equitable” assuming all concurrent wrongdoers had paid. Mirrors the language of the 1978 Act but reverses its effect.
- “Several but not joint” liability. Stricter wording sometimes seen in consultancy appointments. May not perform exactly the same function as a net contribution clause depending on construction.
- Capped contribution. A combined cap and net contribution structure — the professional’s liability is limited both to its proportionate share and to a fixed cap (often a multiple of fees).
- “Net of recovery” language. Reduces the professional’s liability by amounts the client has actually recovered from other parties. Different from net contribution, which deems recovery whether or not it has happened.
- Industry-form clauses. Standard appointments from RIBA, ACE, RICS and others contain prescribed net contribution wording. Bespoke client-drafted appointments often strip them out.
- Consumer carve-out. Some clauses do not apply where the client is a consumer, in recognition of unfair-terms legislation. The clause may then bite only on commercial counterparties.
Related concepts
- Joint and several liability — the English-law default.
- Contribution rights — how the 1978 Act works between defendants.
- Breach of duty of care — the underlying liability question.
- Quantum of a PI claim — what is being apportioned.
Frequently asked questions
Is proportionate liability the default in English law?
No. The default in English tort for concurrent wrongdoers is joint-and-several liability, with contribution between defendants resolved under the Civil Liability (Contribution) Act 1978. Proportionate liability has to be created by contract — typically through a net contribution clause.
What is a net contribution clause?
A clause in a professional’s appointment limiting the professional’s liability to the client to a “just and equitable” share of the loss, on the assumption that all other concurrent wrongdoers had paid their shares. It moves insolvency risk from the professional to the client.
Are net contribution clauses enforceable?
Generally yes, subject to fair-construction principles and any consumer-protection legislation. West v Ian Finlay & Associates [2014] EWCA Civ 316 upheld a clause in a residential architect’s appointment. Each clause has to be assessed against the contract, the parties and the underlying facts.
Does a net contribution clause help the insurer?
Yes — by reducing the professional’s exposure, the clause reduces the insurer’s exposure too. Insurers and brokers usually welcome net contribution clauses in client-side appointments and may scrutinise their absence at renewal.
Why do clients resist net contribution clauses?
Because they shift insolvency risk from the professional to the client. Under the default rule, an insolvent contractor or co-consultant does not reduce the client’s recovery — the remaining solvent professional pays the lot. Under net contribution, the client bears that loss. Sophisticated clients negotiate hard.
Does proportionate liability apply to PI claims generally?
Not as a matter of general law in England and Wales. It applies only where the underlying contract has imported it (most commonly through net contribution). The default tort and contract rules give joint-and-several liability.
How does proportionate liability interact with the policy limit?
The policy responds to the legal liability that has been established against the insured. If that liability has been reduced by a net contribution clause from £600,000 to £240,000, the policy pays £240,000. The unused limit remains available for other claims that year — assuming an each-and-every basis or a remaining aggregate.
What about partial proportionate liability statutes elsewhere?
Several Australian states and many US states have statutory proportionate liability for certain types of claim. UK professionals working in those jurisdictions get the benefit by operation of local law, not by clause. The PI wording’s jurisdiction and territory provisions should be checked to confirm the policy responds to claims under those laws.
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About Apex Insurance Brokers Ltd
Apex Insurance Brokers Ltd is a Bristol-based insurance broker authorised and regulated by the Financial Conduct Authority (firm reference number 724952). The company is registered in England and Wales under Companies House number 07014570. Contact: info@apexinsurancebrokers.co.uk | 0117 325 0027.
Last reviewed: May 2026 by Apex Insurance Brokers Ltd.
Important: this article is general information, not advice on your specific circumstances. For advice on PI insurance for your firm, contact us on 0117 325 0027 or info@apexinsurancebrokers.co.uk.