For many engineers, retirement marks the end of project deadlines, site visits, and professional obligations. However, one retired consulting engineer learned the hard way that professional liability can outlast a career by many years.
Meet David
After more than 35 years as a structural engineer, David decided it was time to retire. He had built a respected consultancy, worked on hundreds of commercial and residential developments, and maintained Professional Indemnity (PI) insurance throughout his career.
When he closed his business, David reviewed his expenses and looked for ways to reduce costs in retirement. His PI insurance premium was one of the first items he cancelled.
“I’ve retired,” he reasoned. “I’m not taking on any new work, so why would I need insurance?”
The Problem Emerges
Three years after retirement, David received an unexpected letter from solicitors acting for the owners of an apartment complex he had designed nearly eight years earlier.
Investigations had revealed structural issues that required extensive remediation work. The owners alleged that design deficiencies contributed to the problem and sought compensation for a portion of the repair costs.
David was shocked. The project had been completed successfully years before he retired. At the time, he had valid PI insurance in place. Surely that policy would respond?
Unfortunately, it didn’t.
Because PI insurance typically operates on a claims-made basis, the policy that applies is the one in force when a claim is made, not when the work was performed. Since David had cancelled his insurance on retirement, he had no active policy to respond to the allegation.
The Financial Impact
Without insurance support, David faced several immediate challenges:
- Funding his own legal defence.
- Paying for expert engineering reports.
- Managing correspondence and negotiations with claimants.
- Facing potential settlement costs personally.
Even before liability was established, legal expenses quickly mounted into tens of thousands of dollars.
What began as a decision to save money on annual insurance premiums suddenly created a significant financial risk to the retirement savings he had spent decades building.
What Is Run-Off Cover?
Run-off cover is designed to protect professionals after they cease trading, retire, sell a business, or otherwise stop practising.
Because engineering claims can arise years after project completion, run-off PI insurance helps ensure protection remains in place for past work.
Many engineering projects have long lifecycles. Structural defects, design issues, specification concerns, or project disputes may not be discovered until years after construction is completed. As a result, retirement does not necessarily eliminate professional liability exposure.
Lessons for Engineers
David’s experience highlights several important lessons:
- Retirement does not end liability for past professional work.
- PI insurance should not automatically be cancelled when a practice closes.
- Claims-made policies only respond when coverage is active at the time of the claim.
- Run-off cover should be considered as part of every retirement or business exit strategy.
- Professional advice should be obtained before cancelling any PI policy.
Conclusion
David’s story is not unique. Many experienced engineers assume that once they stop practising, their exposure disappears as well. In reality, claims can emerge years after a project has been completed, creating unexpected financial and legal challenges.
The cost of maintaining appropriate run-off cover is often small compared with the potential consequences of facing a professional negligence claim without insurance. For engineers approaching retirement, understanding the difference between active PI insurance and run-off cover can make all the difference between a secure retirement and a costly surprise.