Fitness for purpose exclusion

Category: Professional indemnity · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~4 min read

The single most important point

Professional indemnity cover is built on the premise that the insured is liable because it fell short of the standard of a reasonably competent professional. A fitness for purpose obligation is different in kind: it is an absolute obligation to achieve a specified result, breach of which does not require proof of negligence at all. The work can have been done to a faultless standard and the obligation can still be broken because the result was not achieved. Since there is no negligence, there is nothing for a negligence-based policy to respond to — and, to put it beyond argument, most PI wordings exclude the exposure expressly.

The two standards

Under English law a professional supplying services owes, in the absence of a contrary agreement, an obligation to exercise reasonable skill and care. Where services are supplied in the course of a business, section 13 of the Supply of Goods and Services Act 1982 implies a term to that effect — see SGSA 1982 section 13. That is a standard of conduct: it is judged by what a reasonably competent member of the profession would have done, and following accepted professional practice is ordinarily an answer to it. A fitness for purpose term replaces that standard of conduct with a promise about the outcome. The parties are free to agree it, and where they do, the courts will enforce it.

What the exclusion actually says

Wordings vary, but there are two common formulations and most policies use both. The first excludes liability arising from any guarantee, warranty or undertaking that goods or services will be fit for a particular purpose, or that a specified performance, result or design life will be achieved. The second, wider, formulation excludes liability assumed under a contract or agreement that would not have attached in the absence of that contract — that is, liability the insured would not have had under the general law. The second catches a fitness for purpose obligation even where the words “fitness for purpose” never appear. Note the reverse side of this: many policies contain a civil liability insuring clause and a specific write-back for breach of contract to the extent the liability would have arisen anyway — see breach of contract cover.

Where the obligation hides

It is rarely labelled. In practice it arrives through: a warranty that the completed works will comply with the employer’s requirements or the specification; a design life or durability commitment; a performance guarantee expressed in output, throughput or efficiency; an obligation that the deliverable will be “suitable for” or “capable of” a stated use; an undertaking to ensure a result rather than to use reasonable endeavours to achieve it; and a compliance warranty that the design will satisfy a standard or code. Any drafting that uses “shall ensure”, “shall achieve”, “guarantees” or “warrants that” in relation to an outcome deserves a second look.

The conflicting-standards problem

A contract can contain both standards at once — a general obligation of reasonable skill and care, and a specific technical requirement expressed absolutely. In MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd [2017] UKSC 59 the Supreme Court considered exactly that conflict and held the contractor to the more onerous specific requirement, notwithstanding the general skill and care obligation elsewhere in the contract. The lesson is that a general reasonable-skill-and-care clause does not neutralise an absolute obligation buried in a technical schedule; if the two are inconsistent, the specific may well prevail.

What it means commercially

The exposure is real and asymmetric. Accepting a fitness for purpose obligation may win the appointment, but the liability it creates sits outside the cover the firm pays for, and it is the firm’s own balance sheet that meets it. In some placements the position is worse than a simple gap, because the insurer may take the point that assuming such an obligation without notice is itself a breach of a policy condition. Insurers exclude the exposure because it is difficult to price: the trigger is not conduct that can be underwritten but an outcome that may depend on third parties, ground conditions, materials or the client’s own brief.

What to do about it

Review contracts before signature, not at renewal. Where a fitness for purpose obligation is proposed, the usual routes are to negotiate it down to reasonable skill and care, to limit it to a defined and priced deliverable with a cap, or to accept it as an uninsured commercial risk with that decision recorded and taken by someone senior enough to take it. Ask your broker to read the clause against the policy before you commit; the answer is often a two-line amendment. Firms in design and construction, engineering and technology meet this most often — see PI for design and construction and PI for engineers.

Frequently asked questions

Why does PI insurance not cover fitness for purpose?

Because PI responds to negligence — a failure to exercise reasonable skill and care. A fitness for purpose obligation is absolute: it can be broken without any negligence at all, so there is no insured negligence for the policy to answer, and most wordings exclude it expressly.

What does a fitness for purpose obligation look like in a contract?

Usually not by that name. Look for warranties that the works will comply with the employer’s requirements, design life or performance guarantees, and any obligation to “ensure” or “achieve” a result rather than to exercise reasonable skill and care.

Can I get cover for it?

Cover for an absolute contractual obligation is not what a professional indemnity policy is for, and buying round it is rarely straightforward. The practical answers are to negotiate the clause, cap and price the exposure, or retain it as a documented commercial risk.

Related entries

• SGSA 1982 section 13
• Breach of contract cover in PI
• Civil liability extension
• Contract works PI extension
• PI for design and construction
• Duty of care

This entry is part of the Apex Insurance Wiki. Position stated as at August 2026. Last reviewed 2026-08-22. Next review: 2027-02-22. It is general insurance information, not legal advice, and not regulated advice on a specific policy.

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.