Checking professional indemnity cover before instructing
Professional indemnity cover is the ceiling on what you can recover from a consultant. How to read the certificate, why run-off matters, and what reliance letters actually give you.
Ask for the certificate of insurance before you sign the appointment, and read four lines on it: the named insured, the limit of indemnity, whether that limit is each and every claim or in the aggregate, and the expiry date. Those four lines tell you more about your exposure on a planning report than the whole of the fee proposal does.
Professional indemnity cover is the mechanism by which a consultant's mistake becomes recoverable rather than yours. On a planning application it matters most where the report carries a technical opinion that somebody later relies on to spend money: a contamination desk study, a structural appraisal, a flood assessment, a biodiversity baseline.
Why the cover level is your problem
The consultant's limit of indemnity is effectively the ceiling on what you can recover, whatever the appointment says about liability.
A consultant with £250,000 of cover who prepares a desk study that misses a fuel tank is not going to fund a £2 million remediation, and a judgment you cannot enforce is worth nothing. So the question at appointment is not whether the consultant is insured. It is whether the limit is proportionate to what could go wrong on this project rather than to the fee being charged.
Scale it to the consequence. A planning statement for a single extension carries almost no financial exposure. A geotechnical assessment informing foundation design on a forty-unit scheme carries a great deal. The same consultancy may be perfectly appropriate for one and underinsured for the other.
Check the named insured matches the entity you are contracting with. Group structures where the trading company differs from the insured company are more common than they should be, and the mismatch only surfaces at claim stage.
Each and every claim against aggregate
This is the distinction most clients miss.
An each and every claim policy provides the full limit for each separate claim in the policy year. An aggregate policy provides that limit once across all claims in the year, so if the consultant has three other claims running, the cover available to you may already be spent.
Aggregate wording has become more common, particularly for smaller practices and in areas insurers regard as higher risk. It is not disqualifying, but it changes the question you ask, which becomes whether the limit is adequate for the practice's whole workload rather than for your project alone.
Ask about the excess as well. A sole practitioner with a £25,000 excess on a £1 million limit has a real incentive to argue rather than settle a modest claim.
Run-off and reports read years later
Professional indemnity is written on a claims-made basis. The policy that responds is the one in force when the claim is made, not the one in force when the work was done.
That is why run-off cover matters. When a practice closes, merges or the principal retires, the cover disappears unless run-off is bought, and a report prepared in 2020 by a practice that shut in 2024 may have no insurance behind it at all.
Two consequences follow for planning work. First, reports get read long after they are written. A contamination desk study written to support a planning application is pulled out again at sale, at refinancing, and when the ground turns out to be worse than expected. Second, the limitation periods have lengthened. Claims under the Defective Premises Act 1972 were extended by the Building Safety Act 2022, retrospectively for completed work and prospectively for future work, which means exposure on residential projects now runs well beyond the six years people used to assume.
Ask what run-off arrangements the practice has, and for a sole practitioner nearing retirement, ask directly.
Reliance letters for funders and purchasers
A report belongs to the person who commissioned it. A funder, a purchaser or an incoming tenant who wants to rely on it needs a duty of care from the consultant, and the usual route is a reliance letter.
Reliance letters are negotiated documents, and the ones consultants offer as standard usually contain three limitations that repay a careful look:
- A cap on liability to the reliant party, often lower than the limit of indemnity.
- A statement that the report speaks as at its date, with no duty to update.
- A restriction on the number of parties who may rely, and sometimes a time limit.
Sort reliance at instruction, not at the point of sale. A consultant asked for a reliance letter two years after the fee was paid has little incentive to be generous, and one who has ceased trading cannot help at all.
Where the report will be relied on by a party you do not yet know, say so in the appointment and agree the reliance terms then. It costs nothing at that stage.
Liability caps and net contribution clauses
Most modern appointments cap liability at a stated sum, often the amount of the professional indemnity cover, and many include a net contribution clause.
A net contribution clause limits the consultant's liability to the share that would be just and equitable having regard to the responsibility of other parties. In practice it means you cannot recover the whole loss from the one consultant who is still solvent and insured, which is precisely the situation in which such a clause bites.
Neither clause is unreasonable in itself, and pushing for unlimited liability on a modest fee simply makes practices decline the work. What matters is knowing which clauses are in there before the report is commissioned, and pricing the residual risk accordingly. The related question of what the fee actually covers is dealt with in the piece on reading a consultant fee proposal, scope and exclusions.
Watch for fitness for purpose wording too. Professional indemnity policies generally exclude liability assumed under a fitness for purpose obligation, so an appointment promising a particular outcome may be uninsured exactly where it is most onerous.
Sub-consultants and where the cover sits
A single appointment often hides several firms. The lead consultant subcontracts the acoustic work, the topographical survey, the laboratory analysis.
Establish whether the lead consultant takes responsibility for its sub-consultants, with cover that responds, or whether the sub-consultant's own cover is the only cover. Both arrangements are workable; the risk lies in assuming the first and discovering the second.
Laboratory analysis is a particular case. Analytical results often come with terms limiting liability to the cost of the analysis, which is a few hundred pounds against a decision worth far more.
Where the report requires a specific competence, the question of who may author it is separate from insurance, and a council can reject a report because of its author regardless of cover. That is explained in the article on when a council can reject a report because of its author, and reviewers with the relevant competence can be found through the professional directory.
What to keep with the report
Keep six documents together in the project file, because the day you need them you will need all of them.
- The signed appointment, including the standard terms it incorporates by reference.
- The fee proposal and scope, with the exclusions.
- The certificate of insurance current at the date of the work, showing limit and basis.
- The report itself, including its limitations section.
- Any reliance letters issued, and to whom.
- The correspondence recording instructions that changed the scope.
That fourth item deserves attention. The limitations section of a report is where the consultant records what was not done, and a claim frequently turns on whether the limitation was fair. Read it when the report arrives, not when the problem appears.
Browse the report types by category to see which ones carry a professional competence requirement.
This is general guidance, not legal advice, and it is not insurance advice. Check the position with your insurer, your solicitor or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
What does each and every claim mean on a PI policy?
The full limit of indemnity is available for each separate claim in the policy year. An aggregate policy provides that limit once across all claims in the year, so cover may already be partly spent on other matters. Aggregate wording is common for smaller practices and changes how you judge whether the limit is adequate.
Why does run-off cover matter for a planning report?
Professional indemnity is claims-made, so the policy that responds is the one in force when the claim is made, not when the work was done. If the practice has closed or merged without buying run-off, there may be no insurance behind a report at all. Planning reports are frequently read years after they are written.
What is a reliance letter and when should I ask for one?
It gives a third party, such as a funder or purchaser, a duty of care from the consultant in respect of a report they did not commission. Agree reliance terms at instruction rather than at the point of sale, because a consultant asked years later has little incentive to help and may no longer be trading.
Is a net contribution clause a problem?
It limits the consultant's liability to the share that would be just and equitable given other parties' responsibility, so you cannot recover the whole loss from the one firm still solvent and insured. It is not unreasonable in itself, but you need to know it is there and price the residual risk before commissioning.
Does the lead consultant's insurance cover its sub-consultants?
Sometimes, and sometimes not. Establish whether the lead takes responsibility for subcontracted work with cover that responds, or whether the sub-consultant's own policy is the only cover. Laboratory analysis is a particular watch point, because analytical terms often cap liability at the cost of the analysis.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.