Retroactive reckoning: Construction PI faces its 30-year shadow

When the government extended limitation periods for claims under the Defective Premises Act from six years to 30, via the recently passed Building Safety Act 2022, few outside the legal community grasped the scale of the change.

But as the first Building Liability Orders (BLOs) begin to land, construction professionals and their insurers are waking up to a sobering reality – a design defect from 1995 could still trigger a professional indemnity (PI) claim in 2025.

For an insurance class already defined by its long tail, this represents a fundamental shift in exposure – and a test of how well the PI market truly understands its own past.

A generational challenge

“The big change will be in the PI space for stakeholders in the construction industry, where they have an unexpected potential liability under their PI policy because of the Building Safety Act,” explained Joanna Grant, managing partner at Fenchurch Law.

Grant described the new regime as “groundbreaking” for both insurers and insureds.

Under BLOs, she noted, “liability can now extend to associated or parent companies that never actually carried out the design or construction work themselves”.

Previously, only the company that undertook the work would have held the PI cover. Now, with the potential for BLOs to pierce the corporate veil, even dormant or holding companies may face liability decades after a project was completed.

Grant added: “One of the big unanswered questions is whether the PI policies of associated companies within a developer group will be triggered by the grant of a building liability order.”

The extension of limitation periods under the Building Safety Act means that any defect in a dwelling completed since 1995 could, in theory, still give rise to a claim.

“Under the Defective Premises Act, limitation has been extended to 30 years,” said Grant.

”That means any cladding installed this century could now be subject to a claim. Developers and construction professionals now face what’s effectively an open ended retrospective liability.”

The evidential black hole

Alex Dyer, underwriting manager at Collegiate, described the development with dry understatement: “It’s ridiculous, but buildings are supposed to last. You don’t build a house expecting to replace it every 10 years – they have a much longer life expectancy.”

Dyer pointed out that PI has “always been long tail”, with that long reach creating two immediate problems.

He explained: “[Those are] the lack of information about what was designed or built 25 or 30 years ago and identifying whether any later design changes expanded the insured’s liability. Who keeps paper records for 30 years? That’s the problem.”

For insurers, the challenge is not merely one of cover, but of proof.

Nick Burgess, head of professional and management risks at Markel, said the core difficulty lies in evidential matters.

“It is not so much a wording issue as a presentation of risk and claims issue,” he explained.

“The question is to what extent an insured can evidence what occurred in 1995. Do they have the documentation to evidence what they did at that time and are there still staff from that time at the company who can attest to their actions?”

Rob McKay, director of underwriting at Subscribe, agreed that record keeping will be critical.

“Most underwriting systems across the board have had digital files for quite a while now,” he said. “But if you’re going back 25 years, there’s going to be some paper files around – whether they’re still in existence is another question.”

Without contemporaneous evidence, even well-run firms may struggle to prove that design or installation work met the required standards of the time.

Fire exclusion legacy

Any discussion of construction PI in 2025 inevitably leads back to Grenfell. Following the 2017 tragedy, insurers rushed to introduce blanket exclusions for fire safety and cladding risks.

“When Grenfell happened, nobody knew what their exposures were to that type of loss,” said Dyer.

“The first reaction across the market was to put on a blanket cladding exclusion.”

He added, “Cladding losses were traditionally more about wind loading – panels blowing off or fixings failing – not fire.”

Grant noted that these exclusions left many professionals without meaningful cover: “When claims started being made, many found themselves without cover for precisely the sort of fire safety defects at issue.

“As time has passed, there’s been a gradual negotiation over how much fire safety-related cover can be reinstated – but it remains a difficult area for construction professionals,” she said.

Systemic claims ahead?

The first BLOs are now being tested in court, most notably in the Suffolk Park Road case earlier this year – the first of its kind. Legal observers say this judgment set a precedent by confirming that parent companies can indeed be held liable for the acts of dissolved subsidiaries.

Grant said: “It’s a very active space at the moment. Judgments are coming out all the time and each one refines the hierarchy of liability under the Building Safety Act.”

Until a larger body of case law emerges, underwriters remain cautious.

Burgess said: “It is relatively early days in terms of the act, and it has yet to be tried and tested. Until we see case law established, there is a lot we still need to know.”

Markel, he said, was watching closely to see whether claims would materialise: “We have not seen any volume of claims at present. If we do, it may well affect both appetite and capacity.”

While the purpose of the Building Safety Act was to deliver justice for leaseholders trapped in unsafe buildings, insurers worry that its retrospective scope could encourage opportunistic behaviour.

“There will undoubtedly be opportunistic claims that will come out of this – building owners who see it as an opportunity to refurbish their building and get some contribution towards it,” said McKay.

“They will wrap up claims under the guise of it being a safety issue – which it may not be. Thirty years is quite a long while. You might get someone who says ‘my 25-year-old building could do with looking a bit nicer,’ and they’ll look for some contribution towards it.”

The concern is that such claims could erode capacity and harden pricing again – even as competition has begun to return to the PI market.

“We’re a little concerned at the underwriting philosophy of people now writing business they wouldn’t have touched two or three years ago – and on wider terms, at cheaper prices,” Dyer warned.

“Caution seems to have been thrown to the wind.”

The market’s moral choice

Comparisons can be drawn between today’s retrospective PI exposures and historic “trigger” disputes from asbestos litigation.

In those cases, the courts spent years determining whether liability sat with the insurer on risk at the time of exposure or at the time of illness. The Supreme Court’s 2012 ruling clarified that the relevant policy was the one in force at the time of exposure – but not before decades of litigation and insolvencies.

Beyond the technicalities, there is an ethical dimension to how insurers handle these claims.

Grant was clear: “As with the Covid-19 business interruption claims, insurers need to be part of the solution here. They are in the business of taking on risk – and when a sector-wide issue arises, they should be working with stakeholders, not against them.”

“Too often,” she added, “insurers are still looking for reasons not to pay claims, rather than to unlock cover where possible.”

The Building Safety Act has rewritten the liability landscape for UK construction – not only prospectively, but retroactively.

As BLOs test the limits of corporate responsibility and the Defective Premises Act opens the floodgates for historic claims, PI underwriters are facing questions that reach back a generation.

The coming years will determine whether the industry can adapt to this unprecedented retrospective risk – or whether a defect from 1995 becomes the next asbestos for a new generation of insurers.