Design and build cover

Category: Construction · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~5 min read

Definition

In a design and build procurement the contractor takes responsibility for both the design and the construction of the works, either designing from the outset or taking over an employer’s concept design through novation of the design team. The insurance response comes from two separate places. Professional indemnity insurance answers for financial loss caused by negligent design and other professional services. Contract works or contractors’ all risks insurance answers for physical loss or damage to the works, with extensions determining how far damage caused by defective design is picked up. The two policies overlap at the edges and, unless they are read together, leave gaps in the middle.

The standard of care problem

A professional designer’s implied obligation is to exercise reasonable skill and care. A contractor’s obligation in a supply contract may be strict: that the completed works will be fit for their intended purpose. Design and build contracts frequently contain both, in different documents. In MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd [2017] UKSC 59 the Supreme Court held that a fitness for purpose requirement contained in a technical schedule was effective notwithstanding a more general obligation elsewhere in the contract to exercise reasonable skill and care, and that the contractor was liable accordingly. The lesson is that a fitness for purpose obligation can be buried in a technical annexe and still bite.

Why that matters for the insurance

Professional indemnity wordings are written around the reasonable skill and care standard. Most exclude, or do not extend to, liability assumed under a guarantee, warranty or fitness for purpose obligation that goes beyond the duty that would exist at law. A contractor that accepts a fitness for purpose obligation therefore takes on a liability its PI policy will very likely not meet. Some markets will remove or soften the exclusion for defined obligations, but that is an underwriting decision to be taken before the contract is signed, not a wording to be assumed. Reviewing the design obligations in the building contract against the PI wording is the single most valuable pre-contract insurance check on a design and build project.

Contract works and defective design extensions

On the property side, the base contractors’ all risks cover insures the works against physical loss or damage. Defective design, workmanship and materials are dealt with by extensions, conventionally graded so that at the narrowest the defective part itself is excluded and only resulting damage to other parts is covered, and at the widest the cost of the defective part is included as well. Which grade applies determines who pays for the failed element as distinct from the consequences of its failure. On design and build projects that distinction can be a very large number.

Period of cover and the mismatch with liability periods

Professional indemnity is written on a claims-made basis, responding to claims first made during the policy period. Design liability under a contract or collateral warranty executed as a deed can run for twelve years from practical completion, and building safety legislation has extended certain limitation periods considerably further. A contractor therefore needs PI cover in force each year for as long as claims can be brought, not merely during construction. That is why contracts commonly require the contractor to maintain PI cover for a stated number of years after practical completion, and why run-off cover matters on exit, sale or insolvency of a group company. Design-and-build contractors that want the market approached by a specialist can start with our broking approach for design-and-build contractors.

Collateral warranties, net contribution and third parties

Design liability rarely stops with the employer. Collateral warranties or third party rights in favour of funders, purchasers and tenants extend the population of claimants. Net contribution clauses attempt to limit each consultant’s or contractor’s exposure to its own share, and their presence or absence changes the size of the claim a PI policy may face. Warranty obligations, including the number of warranties, their duration, and any assignment provisions, should be checked against the PI wording’s treatment of assumed liabilities.

Building safety obligations

The Building Safety Act 2022 changed the risk profile of design liability for higher-risk buildings by creating new duty holder roles, new competence requirements and new routes to liability. The insurance consequence is that PI underwriters ask more, and narrower, questions about which projects a contractor has worked on and in what capacity. Contractors taking principal designer or principal contractor roles should confirm that the PI wording actually covers the activities of the role rather than only classical design.

Why it matters

Design and build shifts risk to the contractor, and the contractor’s insurance only follows if the obligations accepted are insurable ones. The three checks that matter are: what standard of care the contract actually imposes and whether the PI policy responds to it; how far the contract works extension goes on defective design; and whether cover will still be in force when a claim is made years after practical completion.

Frequently asked questions

Does professional indemnity insurance cover a fitness for purpose obligation?

Usually not. Most PI wordings exclude liability assumed under a guarantee, warranty or fitness for purpose obligation that exceeds the duty the law would impose. MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd [2017] UKSC 59 shows that such an obligation can appear in a technical schedule and still be enforceable, so the contract wording needs checking against the policy before signature.

What is the difference between contract works cover and design liability cover?

Contract works or contractors’ all risks cover insures physical loss or damage to the works. Design liability cover, provided by professional indemnity insurance, responds to financial loss caused by negligent design. A defective design extension on the works policy is about damage to the works; it is not a substitute for PI.

How long does a contractor need to keep PI cover after completion?

Long enough to meet claims that can still be brought. Liability under a deed can run for twelve years from practical completion, and building safety legislation has extended certain limitation periods further. Because PI is claims-made, cover must be in force when the claim is made, which is why contracts require it to be maintained for a stated period afterwards.

Related entries

• Contract works PI extension
• Contractors all risks
• Net contribution clauses
• Principal designer PI cover
• PI for design and construction

This entry is part of the Apex Insurance Wiki. Last reviewed 2026-08-22. Next review: 2027-02-22. It is insurance information, not legal advice, and it states the position as at August 2026.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.