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Professional Indemnity for Precision Engineering: Design, Tolerances & Specification Risk
Precision engineering and manufacturing is often perceived as a “build to print” industry. In reality, many UK workshops do far more than simply machine parts to a drawing. They advise on manufacturability, propose tolerances, recommend materials, refine specs, supply prototypes, support commissioning, and provide technical sign-off. The moment you influence design, specification or performance, you carry a professional duty of care — and the risk becomes a financial loss risk, not just a physical injury or property damage risk.
Professional Indemnity (PI) Insurance is designed to protect your business if a client alleges that your professional advice, design input, drawings, tolerancing decisions, calculations, specifications, or technical documentation caused them a financial loss. These claims can involve rework costs, production delays, contract disputes, or replacement programmes — often without any bodily injury or property damage (which is why public liability and product liability may not respond).
Insure24 arranges specialist Professional Indemnity insurance for precision engineering manufacturers, CNC workshops, tooling designers, and manufacturers providing technical advice or design support to customers across the UK.
Who Needs Professional Indemnity in Precision Engineering?
- Precision engineering businesses providing design for manufacture (DFM) advice
- CNC machine shops creating drawings, tooling designs or specifications
- Prototype manufacturers advising on tolerances, fit, finish and performance
- Toolmakers designing jigs, fixtures, gauges and production tooling
- Manufacturers offering reverse engineering services
- Businesses supplying assemblies with technical documentation and sign-off
- Engineering firms providing on-site commissioning or testing services
- OEMs and suppliers contractually required to carry PI insurance
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Why Professional Indemnity Is Different From Public / Product Liability
Public liability and product liability insurance are primarily designed to cover injury or property damage. Professional indemnity is designed to cover pure financial loss arising from alleged negligence in professional services. In precision engineering, many disputes involve cost and performance rather than injury.
Examples where PI can be relevant:
- Incorrect tolerance advice leads to a batch failing assembly
- Design recommendation results in premature wear or performance issues
- Material specification causes corrosion or failure in service
- Drawing error leads to rework and missed production deadlines
- Incorrect test procedure or commissioning sign-off causes financial loss
Even if you “only provide guidance”, clients may argue that they relied on your expertise. That is why PI is essential where your business provides any form of design, specification, consultancy or technical sign-off.
What Professional Indemnity Insurance Can Cover
- Negligence claims alleging errors, omissions or breach of professional duty
- Defence costs for solicitors, experts and claims handling (subject to policy terms)
- Design & specification errors including drawings, tolerances and calculations
- Financial loss claims where there is no physical damage or injury
- Breach of confidentiality or inadvertent disclosure (depending on wording)
- Loss of documents/data (depending on wording)
How Insurers Underwrite PI for Precision Engineering
Insurers will want to understand what “professional services” you provide, and whether your role is advisory, design-led, or contractual. The broader your design responsibility, the more important it is to structure cover properly.
Common underwriting questions
- What percentage of turnover involves design/specification or consultancy?
- Do you sign off drawings, calculations or tolerances?
- Are you involved in safety-critical applications (automotive, aerospace, medical, defence)?
- Do you supply products globally? (jurisdiction matters for PI)
- What is your quality system and checking process for drawings and revisions?
- What contracts do you sign? Are you accepting “fitness for purpose” obligations?
- Do you have limitation of liability clauses and clear scope definitions?
The best PI outcomes come from clear descriptions, good controls, and contract clarity — not just buying a policy and hoping it responds.
Common Professional Indemnity Claim Scenarios
- Incorrect tolerance stack-up leads to assembly failure and rework costs
- Design change advice causes performance issues in service
- Material selection recommendation results in corrosion and replacement programme
- Revision control error leads to machining the wrong drawing issue
- Tooling design error causes production downtime for a customer
- Commissioning sign-off dispute leads to contractual claim
- Client alleges inadequate testing/inspection caused financial loss
Choosing Limits, Excesses & Contract Requirements
Many precision engineering businesses buy PI because a customer demands it. The key is ensuring the limit and wording match the contract. Some contracts specify a minimum PI limit and require evidence such as certificates or policy schedules.
Consider:
- Limit of indemnity – commonly £250k, £500k, £1m, £2m+ depending on clients and exposure
- Any one claim vs aggregate – how the limit applies across multiple claims
- Retroactive cover – covers work done in prior years (subject to policy terms)
- Run-off cover – important if you cease trading or stop providing design services
- Territories/jurisdiction – where claims can be brought
- Contractual liability – whether you have accepted obligations beyond negligence
Insure24 helps structure PI so it fits your contracts and your real-world engineering workflow.
Risk Management Steps That Improve PI Terms
- Clear scope – define what you will and won’t do in writing
- Revision control – robust drawing/version control procedures
- Independent checks – second-person checks on critical tolerances/specs
- Documented sign-off – records of approvals, deviations and client acceptance
- Limitations of liability – reasonable caps aligned to contract value
- Record keeping – retain design files, emails, notes and calculations
- Quality systems – inspection and testing records supporting your decisions
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Why Choose Insure24 for Professional Indemnity?
- Specialist understanding of precision engineering workflows and contractual exposure
- PI structured around design, tolerances, specs and commissioning activity
- Access to insurers familiar with engineering PI risks
- Support aligning cover to customer insurance clauses
- FCA-regulated UK commercial insurance broker
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FREQUENTLY ASKED QUESTIONS
Do precision engineering manufacturers really need professional indemnity?
If you provide design input, drawings, tolerances, specifications, calculations, testing/commissioning sign-off or technical advice, PI is strongly recommended because claims may involve financial loss without injury or property damage.
Is PI the same as product liability?
No. Product liability is primarily for injury or property damage arising from products. PI is for financial loss claims arising from professional errors or omissions.
What limit of indemnity do engineering clients usually require?
Requirements vary. Many contracts specify £1m or £2m, but some require more. The right limit should reflect your contracts, scope of work and potential claim severity.
Does PI cover past work?
PI is typically written on a claims-made basis. Cover for past work depends on retroactive date, continuous cover and policy terms. It’s important to maintain uninterrupted PI where possible.
Does PI cover design subcontracted to others?
It depends on your role and contract structure. If you are responsible for overall design, you may still face claims even if elements are subcontracted. Your PI should be structured accordingly.
What is the difference between “any one claim” and “aggregate” limits?
“Any one claim” applies to each claim (subject to policy terms). “Aggregate” means the limit can be used up across multiple claims within the policy period.
Can PI cover contract disputes and penalties?
PI typically covers negligence-related claims for financial loss, plus defence costs, subject to terms. Pure contract penalties and liquidated damages are often not covered unless specifically insured (and may be uninsurable).
Does PI cover work carried out overseas?
Cover can often be arranged for overseas territories and jurisdictions, but it must be agreed with the insurer and reflected in the policy wording.
How can we reduce PI premiums?
Strong scope definition, revision control, documented checks, limitation of liability clauses and robust record keeping can improve risk presentation and underwriting terms.
How quickly can I get a PI quote?
Many PI risks can be quoted quickly if scope of professional services and turnover split are clear. More complex risks may require additional underwriting information.
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