Voluntary assumption of liability in PI insurance is a standard exclusion that removes cover for liability the insured has accepted under contract that would not have applied at common law. The exclusion is intended to stop firms expanding the insurer’s exposure by signing onerous contract terms — fitness-for-purpose warranties, indemnities, and performance guarantees that go beyond the duty of reasonable skill and care.
What voluntary assumption of liability means in PI
In UK law, a professional ordinarily owes a duty of reasonable skill and care to a client. That duty arises by virtue of the relationship — it is imposed by the common law of negligence, by section 13 of the Supply of Goods and Services Act 1982, and by the contract’s implied terms. A claim for breach of that duty is what PI insurance is fundamentally designed to cover.
A professional can, however, accept liability that goes beyond this baseline. Common ways this happens include:
- Fitness-for-purpose warranties. The firm promises the deliverable will be fit for a specified purpose, regardless of whether reasonable care was taken.
- Indemnities. The firm agrees to indemnify the client against losses, often on terms that do not require negligence.
- Performance guarantees. The firm guarantees a specified outcome — a system’s throughput, a campaign’s ROI, a structure’s load capacity.
- Best skill and care or higher standards. The firm accepts a standard above “reasonable” — e.g. “the highest standard of care exercised by leading practitioners”.
- Uncapped liability. The firm agrees to uncapped liability, including consequential losses, where statute or common law would have allowed a cap.
The voluntary assumption exclusion withdraws cover for the part of any liability that arises only because of these contractually accepted obligations — i.e. the part the firm would not have been liable for absent the contract.
How the exclusion works in practice
The exclusion is normally written into a civil liability PI wording rather than into a negligence-only wording. A civil liability wording would otherwise pick up any contract claim; the exclusion narrows it back towards a tort-like coverage scope.
Two practical points matter:
- Allocation between common-law and assumed liability. When a claim arises and several breaches are alleged — say, negligence, breach of fitness-for-purpose warranty, and indemnity — the insurer typically pays for the portion of loss that would have arisen from the common-law breach alone, and excludes the additional loss arising only from the voluntarily assumed terms. The allocation can be contentious and is sometimes resolved by negotiation rather than by a clean line.
- Concurrent liability is usually covered. Where the same loss would have been recoverable on negligence alone — i.e. the contract term merely restates the common-law duty — the exclusion does not bite. It is only the additional liability over and above the common-law position that is excluded.
UK PI insurers vary in how strictly they apply the exclusion. Some take a robust line on any contract-based liability beyond a reasonable-skill-and-care standard; others apply it pragmatically and only deny the most egregious examples (fitness-for-purpose on commercial buildings, for instance). The starting point is the wording, but the practical application depends on the insurer and the claim.
Worked example
A Bristol architectural practice with £450,000 fee income signs a client appointment containing both:
- A “reasonable skill and care” obligation (common-law standard).
- A fitness-for-purpose warranty for the building’s intended commercial use.
A claim subsequently arises. The building is fully fit for its design brief but proves unsuitable for the client’s actual commercial use, because the brief did not capture the client’s commercial requirements adequately.
Two scenarios:
Scenario A — the architect was not negligent. The brief was professionally executed; the building meets the brief; the unsuitability flows from the brief itself, not from negligence in the design. The claimant succeeds only on the fitness-for-purpose warranty. The claim is for £350,000 in remedial works.
Under a civil liability PI wording with voluntary assumption exclusion, the insurer’s response is likely to be that the firm’s liability arises only from the voluntarily assumed warranty — there was no negligence — and so the claim is wholly excluded. The firm pays the £350,000 from its own resources.
Scenario B — the architect was negligent in brief-taking. The same claim, but with an arguable case that a reasonably competent architect would have asked more probing questions and identified the commercial use. The claimant could succeed on either basis: negligence (full common-law cover) or fitness-for-purpose (excluded by voluntary assumption).
Under most UK PI wordings, the insurer would pay the part of the loss that flows from the negligence — likely the bulk of the £350,000, since the same damage would result either way. The voluntary assumption exclusion would not produce a windfall for the insurer where the negligence limb covers the loss anyway.
The figures are illustrative. The structural lesson is that the exclusion bites hardest where the contract has expanded liability into territory the common law would not have reached.
When this matters most
Design professionals signing collateral warranties. Architects, engineers and design-and-build contractors are routinely asked for collateral warranties to funders, tenants and purchasers, often containing fitness-for-purpose obligations. Where those obligations cannot be removed, brokers and insurers should be informed in advance.
Consultants on outcome-based contracts. Management consultants, marketing agencies and IT consultancies sometimes accept performance guarantees in client contracts. The voluntary assumption exclusion can leave such claims uninsured. See tort vs contract claim PI.
Firms signing indemnities. Broad-form indemnities — “the consultant shall indemnify the client against all losses arising out of the services” — go beyond the common-law duty and trigger the exclusion. Narrowing the indemnity to losses arising from negligent acts brings it back inside cover.
Common variations and market wording
UK PI policies phrase the exclusion in several ways:
- “Liability assumed by the insured under contract or agreement that would not have attached in the absence of such contract or agreement.” The classic formulation.
- “Any liability assumed by the insured beyond that which would have applied in the absence of the contract.” A simpler restatement of the same principle.
- “Express warranties, guarantees, or representations not customary to the insured’s profession.” A narrower exclusion targeting unusual contract terms only.
- “Fitness for purpose, suitability or merchantability warranties.” A specific sub-exclusion targeting fitness-for-purpose obligations even where the rest of the wording is broad.
- “Liquidated damages, penalties, fines and similar.” Adjacent to the voluntary assumption exclusion — liquidated damages often go beyond the common-law measure. See fines and penalties PI exclusion.
- “Save where the underlying liability would have attached at common law.” A carve-back making clear that concurrent common-law liability remains insured.
The wording sets the legal scope; the insurer’s practice sets the practical application. Brokers should know how their main insurers approach the exclusion in claims practice, not just on the page.
Related concepts
- Tort vs contract claim PI — the underlying distinction that the exclusion polices.
- Breach of contract cover PI — how PI policies treat contract claims, subject to this exclusion.
- Civil liability extension PI — the broad insuring clause that the exclusion narrows.
- Breach of duty of care PI — the common-law standard against which the exclusion measures.
- Fines and penalties PI exclusion — adjacent exclusion for non-compensatory amounts.
Frequently asked questions
Does the voluntary assumption exclusion mean PI does not cover contract claims at all?
No. It excludes the part of contract liability that goes beyond the common-law duty of care. Most contract claims have a parallel negligence basis, and that part is normally covered. The exclusion bites only on the additional liability the contract creates beyond what tort would impose.
What contract terms typically trigger the exclusion?
Fitness-for-purpose warranties, performance guarantees, broad-form indemnities, “best” or “highest” standards of care, uncapped liability provisions, and consequential-loss undertakings. Each of these can extend liability beyond the common-law baseline.
Can I get cover for fitness-for-purpose obligations?
Sometimes, by specific endorsement, with additional premium and underwriter consent. Many UK PI insurers will not write fitness-for-purpose cover at all. Where available, cover is usually sub-limited and tied to specific contracts that have been underwritten.
How do I draft a contract to stay inside PI cover?
Use a “reasonable skill and care” standard; avoid fitness-for-purpose warranties; limit indemnities to losses arising from the firm’s negligent acts; cap aggregate liability at a level the PI cover supports; exclude consequential and indirect losses; avoid guarantees of outcome. A broker and a lawyer working together can usually align the contract with the cover.
Does the exclusion apply to indemnities given to clients?
Yes, where the indemnity extends liability beyond what would have arisen in negligence. An indemnity for “all losses arising out of the services” goes beyond a negligence duty and is caught. An indemnity for “losses arising from the consultant’s negligent acts” is co-extensive with the common-law duty and is not caught.
What if the client refuses to remove a fitness-for-purpose warranty?
The firm can: (a) decline the work; (b) negotiate a cap or sub-limit on the warranty; (c) negotiate a carve-back to “fit for the purpose set out in the brief, save where the lack of fitness arises from circumstances beyond the consultant’s reasonable control”; (d) discuss specific endorsement with the PI insurer. Walking away from work because of one contract term is unattractive; pricing the risk is sometimes the answer.
Does the exclusion apply to standard JCT and NEC contracts?
The base JCT and NEC consultancy and construction contracts are usually drafted to align with what PI cover responds to. Bespoke amendments to those standards — sometimes inserted by client lawyers — can introduce fitness-for-purpose, indemnity, or performance-guarantee terms that trigger the exclusion. Reviewing the amendments is more important than reviewing the base form.
How is the exclusion applied where a claim has both negligence and contract bases?
The insurer typically responds to the part of the loss that flows from the common-law breach, and excludes any additional loss flowing only from the contract-assumed liability. Where the loss would have been the same on either basis, the exclusion produces no practical reduction in cover.
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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.