A one-off industrial design job to supply a unique temperature control system for giant commercial cooling units for a large construction project in Malaysia proved a difficult insurance requirement to find cover for. At $24 million the high value of the contract and its singular nature put most potential insurers off, but our Gallagher brokers found an eventual insurer who sealed the deal just in time to meet the contract deadline.

The liability insurance requirement for a unique, one-off project

Under the terms of the agreement, the Australian industrial design business supplying the bespoke cooling system design and outsourcing its production to a Malaysian fabricator was deemed to be the manufacturer and as such subject to the professional indemnity liability involved.

The industrial design company representatives visited the chosen manufacturing facility in Malaysia and were satisfied with its capability to produce the seven $550,000 units to standard, but the factory didn't have the professional indemnity cover required for the job.

Professional indemnity cover was essential for the industrial design business to meet the terms of the contract which had to be supported by rigorous risk management, including the requisite insurance.

As the designer and titular manufacturer of these units, the industrial design company's competencies were critical to the quality and efficacy of the cooling system — which if it failed or was found faulty would be a potential liability.

In this situation professional indemnity cover provides protection for the supplier/designer and for the client/buyer of their services as it gives liability protection to both parties and enables confidence in the transaction.

The challenge of finding professional indemnity cover for a high value, one-off project

The design company called on its Gallagher broker to help secure the necessary cover within the three week deadline for the design company to secure the contract.

Naturally the insurance underwriters we contacted sought detailed information about the nature of the cooling system and the business's contractual responsibilities, and we provided all the information, including the contract documents, to enable them to ascertain where the liability risks might occur.

This openness gave one insurer the confidence to proceed with providing the necessary cover in time to meet the deadline for securing the contract.

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