The fitness for purpose exclusion, explained

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-05

Most construction and engineering professionals assume their professional indemnity (PI) insurance follows them into every contract they sign. It does not. One of the most important limits on that cover is the fitness for purpose exclusion, and it catches out architects, engineers, surveyors and design-and-build contractors who agree to contract terms without checking what they insure.

What "fitness for purpose" actually means

In law there are two very different standards a professional can be held to.

• Reasonable skill and care. The default duty of a professional: to work to the standard of a reasonably competent member of your profession. If you meet that standard, you are not liable even if the outcome disappoints. This is the negligence standard your PI policy is built around.
• Fitness for purpose. A stricter, results-based duty. You guarantee that the finished thing will be suitable for its intended purpose. If it is not, you are liable, even if you were careful and did nothing a competent professional would call wrong.

The distinction matters because insurers price and reserve for negligence, which is assessed and defensible. A guarantee of outcome is close to strict liability, which is largely uninsurable in the ordinary market. So PI wordings typically carve it out.

Where the duty comes from

A fitness for purpose obligation usually arrives in one of two ways:

• Expressly, in the contract. Words such as "fit for purpose", "fit for its intended use", "guarantee", "warrant" or "ensure" in a design obligation or a collateral warranty.
• By implication. Under the Supply of Goods and Services Act 1982, and the Consumer Rights Act 2015 for consumer work, terms about fitness can be implied, and case law has read fitness for purpose duties into design-and-build arrangements.

The leading modern authority is MT Højgaard A/S v E.ON Climate & Renewables UK (2017) in the Supreme Court, concerning offshore wind turbine foundations. The court held that a specific fitness for purpose requirement in the technical schedules could bind the contractor even though the contract also required reasonable skill and care, and even though the contractor had complied with the agreed international design standard. The strict promise won. That is exactly the exposure the exclusion leaves with you.

How the exclusion reads in a policy

Wordings vary, but a typical PI exclusion strips out liability that arises solely from a fitness for purpose, guarantee or warranty obligation that goes beyond the reasonable skill and care standard. In practice that means:

• If a claim would have succeeded on ordinary negligence grounds, cover usually responds.
• If the claim only succeeds because you promised a specific result and failed to deliver it, the exclusion can bite and you fund the loss personally.

Some wordings soften this by covering liability you would have had "in the absence of" the onerous contract term, so genuine negligence is still insured. Others are stricter. The precise language is what counts, which is why the contract and the policy need to be read together, not separately.

Reasonable skill and care vs fitness for purpose

Why it matters to you

The real danger is a silent gap. You win the work, the client's contract contains a fitness for purpose clause buried in the design schedule, and you sign it. Years later a component underperforms. You were not negligent, so you assume you are safe, but the client sues on the strict promise. Your PI insurer points to the exclusion, and you are personally exposed for a loss that could dwarf your fee. On a large scheme that gap can run to figures well beyond typical limits such as £1m, £2m or £5m.

Practical steps that protect you:

• Read the design obligation before signing. Watch for "fit for purpose", "guarantee", "ensure" and "warrant". Amending one clause to "reasonable skill and care" can restore insurability.
• Match contract to policy. Send the draft wording, or at least the liability clauses, to your broker before you commit, not after a claim.
• Check collateral warranties. These often smuggle in stricter duties than the main contract.
• Resist "net contribution" trade-offs blindly. Contract negotiation is where insurability is won or lost.

An experienced broker can review your contractual liabilities against your wording and flag where you are agreeing to something you cannot insure. Start a professional indemnity enquiry with Apex and we will look at the clause and the cover together.

Common questions

Does every PI policy exclude fitness for purpose?
Most do in some form, but the wording differs. Some exclude it outright, others still cover the loss you would have had on ordinary negligence grounds. Read your specific policy rather than relying on a general assumption.

Can I just delete the fitness for purpose clause from a contract?
Often you can negotiate it down to a reasonable skill and care standard, which usually restores insurability. Clients do not always agree, so the alternative is to understand and price the uninsured risk before you sign, or to walk away.

If I use an agreed design standard, am I safe?
Not necessarily. In the Højgaard case the contractor met the agreed standard yet was still bound by a stricter fitness for purpose requirement elsewhere in the documents. Compliance with a standard does not override an express guarantee of outcome.

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.