What Can Possibly Go Wrong (WCPGW) - run-off insurance and professional risk
 

At the recent ArchiTeam Compulsory Insurance Session for members, there were a few questions regarding run-off insurance and professional risk, with a few recurring questions:

  • How long should run-off insurance be maintained?
  • If a practice has been wound up, can claims still be made?
  • Can former directors be personally pursued after deregistration?
  • And how long should project documentation actually be retained—7 years or 10?

 

For many years, ArchiTeam has provided members with access to run-off insurance. This is available via completion of the Run-off Insurance form. The first year’s premium is calculated based on your final year’s invoice value, with a 10% reduction applied. In the second year, the premium reduces by a further 20%, then 30% in the third year, and so on, until the eighth year, when only the membership fee is payable.

 

To provide further clarity on legal exposure and documentation retention, we sought guidance from Dado Hrustanpasic, Partner at Holding Redlich:

A building action—defined as a claim for damages arising from defective building work—can be brought for up to 10 years after the issue of an occupancy certificate. Architects can be captured within these claims, meaning proceedings may be initiated against them within this period.

For this reason, it is prudent to retain all relevant project documentation for at least 10 years after completion. In practice, retaining documents for an additional year is advisable to account for delays in service or contribution claims.

The same timeframe generally applies to potential liability. Architects may face claims up to 10 years after the issue of an occupancy certificate, and in some cases, may not become aware of those claims until later. Maintaining run-off insurance during this period is one way to mitigate that risk. If you are concerned about potential liability on a project, legal advice can help you understand the magnitude of that risk and mitigation options.

Importantly, winding up a company does not necessarily eliminate exposure. There are circumstances where claims may still arise:

  • A company’s liability is separate from that of its directors, but a director’s personal liability is not extinguished simply because the company has been deregistered.
  • A deregistered company can be reinstated, particularly if outstanding liabilities are identified.
  • In some cases, claims may be made directly against a company’s insurer, provided relevant cover was in place prior to deregistration.

This is a complex area, and directors considering winding up a practice should seek legal advice tailored to their specific circumstances.

If you have further questions, ArchiTeam members can access a complimentary 15-minute legal consultation via the ArchiTeam Member Legal Guidance Submission Form.
ArchiTeam Members 15-Minute Legal Guidance Submission Form

 

 

 

Disclaimer – ‘What could possibly go wrong?’ is not an advice column, it is only general comment from ArchiTeam who are not aware of your circumstances with any issue that you may have. You cannot rely on these general comments, each member must make their own decisions about any action they should take and seek independent advice of their own if they are unsure.