A professional who agrees to exercise reasonable skill and care promises to work to the standard of a reasonably competent member of the profession. A professional who agrees a fitness-for-purpose obligation promises a result: that the completed design or works will be fit for the purpose made known. The second is a strict obligation. It can be breached even where the professional has done nothing careless.
Most professional indemnity policies insure liability arising from negligence, that is, a failure to exercise reasonable skill and care. They typically exclude, or do not cover, liability the insured assumes under contract that goes beyond that standard. A fitness-for-purpose obligation is the classic example. If a firm signs up to deliver a design that is fit for purpose and the design proves unsuitable, the resulting liability may fall outside the policy even though the firm was not negligent.
In MT Hojgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59 the Supreme Court held a contractor to a fitness-for-purpose requirement buried in a technical schedule, even though the main contract also referred to an international standard that turned out to be flawed. The case shows that a fitness-for-purpose obligation can sit in specifications and appendices, not just the headline clause, and the courts will generally give effect to the more demanding requirement.
The usual approach is to negotiate the obligation down to reasonable skill and care, or to add a clause confirming that nothing in the appointment imposes a duty exceeding the reasonable skill and care of a competent professional. Where a fitness-for-purpose obligation cannot be removed, the firm needs to understand that the associated liability may be uninsured and price that risk into the decision to accept the work.
The tension is sharpest on design and build projects, where a contractor takes single-point responsibility for both design and construction and the employer's requirements often specify an outcome. A performance specification that the finished works will achieve a stated energy rating, structural capacity or throughput can amount to a fitness-for-purpose obligation even where the word purpose never appears. The contractor may in turn pass that obligation down to its consultants, so a designer several steps from the employer can end up carrying a strict obligation without realising it. Reading the obligation back up the chain, and confirming that each appointment is limited to reasonable skill and care, is the practical protection.
Apex reads appointment and warranty wordings against the professional indemnity policy so a firm can see, before signing, where a contractual obligation steps outside cover. This is part of the demands-and-needs assessment for engineering and design practices. The pillar guides for engineers, architects and design-and-build contractors set out the sector context.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.