Professional indemnity claims arrive years after the work, frequently about a project the engineer barely remembers, and often as a letter that does not look like a claim. How the first few weeks are handled affects the outcome substantially.
Recognise it early
A claim rarely begins with a formal proceeding. It begins with:
- A letter raising concerns about a building or design.
- A request for your project file from a lawyer or another engineer.
- Being named in correspondence between other parties.
- A call from a former client about a problem.
- A council raising a question about work you certified.
Any of these is a circumstance that may give rise to a claim, and that is the trigger for notification.
Notify your insurer immediately
Professional indemnity operates on a claims-made basis. The policy in force when the claim or circumstance is notified is the one that responds — not the policy in force when the work was done.
Two consequences:
- Notify within the policy period. Delaying notification into the next policy year can leave you uninsured for that matter.
- Late notification can prejudice cover. Policies require prompt notification, and insurers can decline where late notice has prejudiced their position.
Notify even where you believe the claim is unfounded. Notification is not an admission and costs nothing.
Do not admit liability
Most policies require the insured not to admit liability or settle without consent, and doing so can prejudice cover.
This is genuinely difficult for engineers, whose professional instinct on being told a building has a problem is to help solve it. Being helpful about the technical facts is fine; accepting responsibility is not, and the distinction can blur in a conversation.
The practical approach: acknowledge the concern, say you are looking into it, and refer the matter to your insurer before responding substantively.
Preserve the file
Do not add to, tidy, reorganise or delete anything. Altering a file after a claim arises is catastrophic even where the alteration was innocent, because it destroys the credibility of everything.
Preserve the whole record: drawings and revisions, calculations, correspondence, site records, the engagement terms, producer statements issued, and file notes.
Document retention policies should account for the Building Act’s long-stop limitation period for civil proceedings relating to building work, which means files need to be kept far longer than ordinary business records.
What determines the outcome
The legal question is whether you exercised the care, diligence and skill of a reasonably competent engineer in the circumstances at the time — judged against the standards, knowledge and practice then, not now.
What supports a defence:
- A clear scope in the engagement, with exclusions stated. A great many claims turn on whether something was within scope at all.
- Documented reasoning for design decisions, recorded at the time.
- Evidence of what you relied on — information supplied by others, assumptions stated.
- Records of monitoring where a producer statement was issued for construction.
- Evidence you raised concerns where you did, particularly where advice was not followed.
The claims that are hardest to defend are those where scope was undefined and no contemporaneous record exists of what was decided or why.
Producer statements are a common focus
PS4 statements attract particular attention, because they assert that construction monitoring was carried out and the work accords with the design.
Issuing one without having done the monitoring described is the fact pattern behind a number of disciplinary and liability findings. If you were pressured into one at project end for work you did not observe, that will surface.
Disciplinary and liability are separate
A complaint to a professional body and a civil claim are different processes with different tests and can run simultaneously. Your insurer may cover defence of disciplinary proceedings depending on the policy — check.
Do not assume that responding to one is the same as responding to the other, and take advice on both.
Prevention
- Written engagement with a defined scope and exclusions, every time.
- A liability cap agreed.
- Producer statements addressed expressly at engagement, including monitoring level.
- Contemporaneous design decision records.
- Peer review before issue.
- Continuous PI cover including run-off after you stop practising.
- Declining work outside your competence, however commercially awkward.
Engineering New Zealand publishes practice guidance and model terms of engagement for members, and the Building Act is available free at legislation.govt.nz.
General information only, not legal advice. Notify your insurer and take advice on any actual claim.
