A Consulting Engineer client forwarded us a framework agreement for review in August 2015. After an initial review negotiations between Brunel and their client’s solicitors were requested by the engineer, which began in October 2015 to agree amendments.
A sticking point was a limitation clause which stated that a) every contract awarded under the framework agreement would be subject to a 12 year limitation period regardless of the manner in which the contract has been executed and b) the Limitation Act 1980 shall not apply.
Brunel flagged that this is an un-insurance issue because if a professional signs up to a blanket 12 year limitation period and the contracts are not signed by deed (and therefore should only have a 6 year limitation period under the Limitation Act 1980), a claim could be made out of time which would not be covered under the professional indemnity insurance policy by virtue of the ‘onerous contractual liability’ exclusion. The acid test for this exclusion is any liability over and above what the professional would have been liable for under common law or statute.
The solicitors refused to amend the clause on the basis that there were only a few signatories in their client’s head office who could execute the contracts as deeds and as such, the contracts needed to be signed under hand.
Brunel firmly pointed out that an argument of “inconvenience” is disproportionate to the potential uninsured losses which a professional would face given the technical argument an unsupportive insurer could use to avoid any liability for the claim. Moreover, Brunel cited its anonymised past experience with the same contractor but for different construction professionals, and flagged that the contractor had agreed to amend this limitation clause in the past.
The clause was amended.
