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Adjudication is time critical for Professional Indemnity insurance (PI)

The Adjudication compulsory dispute resolution mechanism is often described as “pay now, argue later” as it can deliver a cost effective and speedy means of determining disputes in the Construction industry. It has the effect of protecting the cash flow on which projects and contractors depend.

Typically, insurers will require they are notified within just 48 hours of an adjudication notice being received, so every element of Adjudication is time critical. Design and Construct Professional Indemnity insurance (PI) covers the insured against its legal liability for damages, costs and expenses arising out of the Insured’s Professional Activities

Under the Housing Grants Construction and Regeneration Act 1996, most adjudicators will allow the Respondent 14 days to produce a Response, but this could be as little as 7 days. It is crucial not to ignore warnings of potential action and the basis of a response should be put into action which may include using experts and contacting “key” witnesses and supporting documentation.

 

Adjudication is appropriate for resolving claims relating to:

  • Interim payments.
  • Delay and disruption of the works.
  • Extensions of time for completion of the works.
  • Defects in the works.
  • The final account.

 

An Adjudication can also relate to complex claims such as breach of contract, termination of contract and professional negligence.

There are key facts that have to be established before starting an adjudication and a party should ensure the dispute has been aired between the parties so that it has crystallised.

The dispute has to be defined in the notice unless the contract allows more than one – only one included in the dispute – and it must comply with the contract time limits. A Respondent can raise any defence, including those not raised previously, and that the Adjudicator will have jurisdiction to consider that defence.

The Adjudica­tion procedure under the Construction Act provides for a tight timetable, with the adjudicator aiming to reach a decision within 28 days of receipt of a referral notice.

The adjudicator's decisions are binding until the dispute is finally determined by legal proceedings, arbitration or by agreement, usually enforced by the Technology and Construction Court (TCC).

Recent cases have focussed on key aspects of the process including Beck Interiors Ltd v UK Flooring Contractors Limited  which highlighted the requirement to allow sufficient time as there was only one working day - five calendar days spanning the Easter bank holiday weekend- given for the respondent to consider and respond to a claim, a dispute regarding that claim was held not to have crystallised before the commencement of adjudication proceedings and an adjudicator did not have jurisdiction to decide on it. The ruling stated, “the five-day period between Beck’s email claim and the notice of adjudication was effectively one working day which was insufficient to permit the inference that UKFCL intended to dispute the claim.”

In Bovis Lend Lease Ltd v Trustees of the London Clinic [2009], Bovis agreed to carry out redevelopment work on the Trustee’s property. Following a dispute, an adjudicator’s decision was issued in favour of Bovis, who then made a summary judgment application for the enforcement of the adjudicator’s decision. The Trustees submitted, along with other arguments, that there was too much new evidence for them to consider within the time period. 

W Denis has a ProFin division which specialises in Professional Indemnity Insurance. The ProFin Brokers have full market access, including all PII underwriters in the Design & Construct specialism. For a competitive quotation, please make arrangements via Daniel.Moss@wdenis.co.uk

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