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PI INSURANCE FOR DESIGN RESPONSIBILITY, SPECIFICATION ERRORS & CONTRACT-DRIVEN RISK
Why Design & Specification Risk Is Different from “Products Liability”
If you design, specify, advise, programme or commission industrial equipment, your biggest exposure can be the cost of getting it wrong: performance shortfalls, incorrect specifications, safety logic errors, documentation defects, or integration issues that trigger expensive rectification and contract disputes.
Products liability usually focuses on third-party injury/property damage caused by the product. Professional indemnity focuses on allegations of negligence in your professional services (errors and omissions) — often involving financial loss, rework and defence costs, subject to wording.
Insure24 helps industrial equipment businesses structure PI to reflect how you actually operate: design responsibility, contracts, QA/change control, and the realistic “worst-case” cost of a dispute.
What Does Professional Indemnity (PI) Cover for Industrial Equipment Businesses?
Professional indemnity is designed to respond to claims alleging negligence, errors or omissions in the professional services you provide — including design, specification, calculations, programming, advice and project documentation.
PI is typically written on a claims-made basis, so correct retroactive date, continuity and notification discipline are key. Cover is always dependent on policy terms, conditions, exclusions and definitions.
- Design / specification negligence — allegations you designed or specified incorrectly (policy dependent).
- Errors & omissions (E&O) — mistakes in advice, drawings, calculations, selection of components or documentation.
- Defence costs — legal costs to defend allegations, subject to the policy structure.
- Rectification / mitigation — some wordings can include mitigation/rectification costs (often controlled and limited).
- Contractual liability alignment — where policy terms allow, PI can be structured to reflect the contracts you sign.
- Loss of documents / data — some policies extend to documentation and data-related exposures.
- Sub-consultants — cover can sometimes be arranged for your appointed sub-consultants (wording dependent).
- Worldwide/territory options — important if you export or work on overseas projects (policy dependent).
Common PI Claim Scenarios (Design & Specification)
Underwriters price PI based on the realistic ways your work can fail and how expensive it is to put right. Common scenarios include:
- Performance shortfall — equipment does not meet throughput, tolerances or duty cycle due to design/spec error.
- Incorrect component selection — wrong motor/drive/pump/valve specification causes repeated failures or non-compliance.
- Controls/PLC logic error — programming mistake causes downtime, damage or a safety incident allegation.
- Safety design dispute — interlocks, guarding or safety circuits alleged to be inadequate against standards/spec.
- Documentation error — incorrect drawings, manuals, or commissioning records lead to costly rework.
- Integration/commissioning issue — interface assumptions prove wrong; handover delayed and liquidated damages threatened.
- Change control failure — unmanaged revisions cause mismatched parts or software versions and a dispute.
- Warranty/contract conflict — customer alleges professional negligence beyond warranty scope; PI responds (policy dependent).
What Underwriters Look For (and How to Improve PI Terms)
PI is priced on the likelihood and severity of disputes. Strong technical governance and contract discipline can materially improve terms.
Key appetite and pricing drivers
How much design responsibility you hold, typical project values, who signs off specifications, the sectors you work in, your contract terms (caps, warranties, fitness-for-purpose language), and the strength of your QA, testing and change-control processes.
Examples of “quote-ready” evidence
- Scope & responsibility map — what you design vs supply vs install vs advise, and who signs off.
- Contracts & liability caps — standard Ts&Cs, caps of liability, warranty wording and exclusions.
- QA / design reviews — documented design checks, peer review, calculations and approval gates.
- Testing evidence — FAT/SAT scripts, commissioning checklists, validation/acceptance records.
- Change control — revision control for drawings, BOMs, software versions and customer approvals.
- Competence — key staff experience, qualifications and use of competent subcontractors.
- Claims history narrative — what happened (if any) and controls implemented to prevent recurrence.
- Cyber/data angle — if you manage OT/controls, how you protect code, backups and remote access.
Common Gaps: PI vs Warranty vs Contract Works
Many disputes fall between “warranty” expectations and insurance triggers. PI can be powerful, but only when structured properly and paired with sensible contract language.
Typical pitfalls we help you avoid
The most common issues are: wrong retroactive date, late notification, unclear scope, inadequate limits versus project values, and contract terms that create uninsurable obligations (like fitness-for-purpose).
- Claims-made misunderstandings — cover depends on policy in force when claim is made and notified.
- Retroactive date — too recent and earlier work may be outside scope.
- Fitness-for-purpose — can create hard-to-insure obligations; manage via contracts where possible.
- Liquidated damages — delay penalties may not be covered; structure contracts carefully.
- Rectification scope — not all “rework” costs are covered; wording matters.
- Contractual acceptance — unclear sign-off drives disputes; document FAT/SAT and approvals.
- Territory mismatch — exports/overseas projects need correct jurisdiction/territory.
- Subcontractor risk — ensure back-to-back terms and subcontractor PI where needed.
How to Get Professional Indemnity (Design & Specification) Insurance
- 1. Confirm your professional services — design, calculations, drawings, programming, commissioning or advice.
- 2. Share contracts & project profile — typical project values, warranties, caps and key customer sectors.
- 3. Evidence governance — design reviews, FAT/SAT, change control, approvals and documentation standards.
- 4. Set limits & retro date — match limit to realistic dispute size and ensure continuity.
- 5. Place & document — align PI with PL/Products, contract works and cyber/OT exposures where relevant.
“Our dispute wasn’t about injury or damaged property — it was about whether our design met the performance spec. Insure24 helped us structure PI and contracts so we could defend the claim and control rectification costs.”
Technical Director, Industrial Equipment IntegratorPROTECT YOUR BUSINESS
- PI structured for industrial equipment design, specification and commissioning responsibilities
- Help aligning PI with contracts, warranties and project risk allocation
- Support evidencing QA, FAT/SAT, change control and documentation discipline
- Guidance on limits, retroactive date, notifications and claims-made pitfalls
- Fast, specialist broking for complex manufacturing and engineering-led businesses
FREQUENTLY ASKED QUESTIONS
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What is professional indemnity for design and specification risk?
Professional indemnity (PI) helps protect businesses that design, specify, advise, programme or commission industrial equipment against claims alleging negligence, errors or omissions in professional services, subject to the policy wording.
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How is PI different from products liability?
Products liability usually focuses on third-party injury or property damage caused by the product after supply. PI focuses on allegations of professional negligence in design/specification/advice, often involving financial loss, rectification and dispute costs, subject to terms.
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Is PI written on a claims-made basis?
Yes, PI is typically claims-made, meaning the policy in force when a claim is made (and notified) is the one that can respond, subject to the retroactive date, exclusions and notification conditions.
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What are common PI claim scenarios for machinery and automation?
Typical scenarios include incorrect specifications, performance shortfalls, control/PLC programming errors, safety logic disputes, documentation mistakes, and commissioning/integration issues leading to rework, delays and contractual claims.
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What information helps insurers quote PI?
Insurers typically want clarity on design responsibility, contract terms and liability caps, turnover split (design vs manufacture vs install), typical project values, QA/change-control processes, staff competence and claims history.
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How quickly can Insure24 arrange PI cover?
Indicative terms can often be progressed quickly once your scope, contracts, turnover split and QA evidence are clear. Higher-risk sectors, large project values or complex contracts may require deeper underwriting — but we’ll move it forward efficiently with the right information upfront.