Uptake of solar panels has accelerated significantly over the past 5 to 10 years, driven by a mixture of government incentives, increased energy prices, and environmental concern. As contractors work to meet the ongoing demand, they must remain mindful of the risks they face during installation, including the various exclusions that exist under typical professional indemnity insurance (PII) policies.
What does professional indemnity insurance cover?
Subject to the specific terms of the policy, PII is designed to provide coverage for negligent professional advice in relation to the solar installation, including the design and specification of the various components, including the panels, inverters, cabling and metering in accordance with the “law of the land” (i.e. the laws made by the courts and legislation passed by Government).
PII is not there to provide coverage for liabilities that only exist because of a contractual term, nor will it provide coverage for defective workmanship (i.e. the physical act of installing the solar panels and associated components).
Fire issues
Whilst the coverage position is improving, many policies still contain exclusions which limit the insurer's liability for anything related to fire safety.
From a solar contractor's perspective, one of the main risks of rooftop solar is fire arising because of negligent design or advice in relation to the solar panels and associated infrastructure, such as inverters and batteries.
A prudent solar contractor will need to make sure that their PII policy does not contain an overly onerous fire safety exclusion, as a poorly or harshly worded exclusion may significantly impact their ability to recover under the policy in the event of a claim.
Roof safety
In addition to issues with the design of the installation itself, contractors may also need to consider whether the roof will be able to bear the weight of the panels and associated infrastructure.
Most insurance policies will have a requirement that any survey must be undertaken by an appropriately qualified person in order for them to provide coverage. It is therefore important that, where responsibility for undertaking such surveys falls with the solar contractor, either they or any appointed sub-contractor have those appropriate qualifications.
Solar consultants should also check that their PII policy doesn't contain any further exclusions or conditions in respect of surveys and assessments of this nature.
Performance
Where solar panels underperform compared to expected levels due to negligent design or advice, then PII can be expected to provide coverage.
However, situations may occur where the solar contractor has promised a certain level of generation, and the installation does not meet that level – either because of an issue with the physical panels themselves, or because of general factors such level of irradiation, or reduced performance due to hot weather. In these cases, this failure is unlikely to be regarded as down to negligent advice or design, and instead as a result of a contractual promise given by the solar contractor. Such contractual promises are typically excluded by PII policies.
This risk is particularly pertinent for solar contractors, as contracts can often contain clauses that mean payment levels are subject to the photovoltaic (PV) panels achieving certain performance metrics, such as the performance ratio or yield. Contractors should be careful about any guarantees that they give as to the performance of the solar array.
PII is not a 'cover-all'
There is often an assumption within the construction industry that PII is a 'cover all' for anything that might go wrong. However as highlighted above, the truth is a bit more nuanced, and there are potentially significant areas of liability that may not be covered by PII.
If solar contractors are unaware of their coverage under their PII we recommend they contact their broker, who should be able to explain the risks of exposure under their current policy.
All of Lockton's clients have access to Contract Review Services, and a team of legally trained specialists who offer training, insights, and know-how on the latest developments and their potential impacts on insurance coverage.
For further information, please visit our Lockton for Architects & Engineers page, or contact:
Jessica Snowdon, Vice President, Global Professional & Financial Risks
E: jessica.snowdon@lockton.com
Nick Rains, Legal Group Executive
E: nick.rains@lockton.com