Top claims risks facing engineers in 2025

Increased Risk of AI

Due to the perceived speed at which it has come to the forefront, understandably there are concerns over the increased role of technology and in particular the role of AI within the sector. It is important to consider that the term AI encompasses various different aspects, from machine learning (ML) to generative AI (such as ChatGPT).

Already, firms are using AI and ML to analyse building performance^[1], predict project outcomes and provide insights into their operations^[2]. This has the potential, if used correctly, to enable firms to become more efficient, profitable and allow engineers more time to focus on their role, removing the administrative burden often faced by the role.

However, the output of AI and ML is very much a product of the input and there remains a clear risk that in the absence of adequate supervision (both over the data being input and the output being generated), errors could be made. Additionally, there is a risk that in the absence of adequate human oversight, errors will be replicated on a larger scale than they otherwise would.

Further to this, firms need to be considering the impact uptake of this technology will have on their more junior members of staff and whether they can ensure that adequate training is in place.

Finally, there is a consideration of if claims arise out of the use of AI, whether they would be covered under existing insurance arrangements or whether a more bespoke solution would need to be adopted.  

Whilst there is a clear business case for the use of AI within the engineering sector, firms should remain cautious around an overreliance on its use. Due to the reasons above, caution should be used in considering it as a substitute for human decision making. Importantly from an insurance point of view, firms should ensure that where they are incorporating AI within their design process, they are taking insurers along with them on the journey.

Building Liability Orders and Remediation Contribution Orders

Whilst not applicable for all firms, there are now additional claims risks for firms who acquire other practices, whereby the courts can grant Building Liability Orders against associated companies, so claims may now go beyond the corporate structure and make one company’s liability the liability of one of its associated businesses. Whilst the original intent was to prevent certain entities (contractors and developers) evading civil liability for defective works through the use of alternative company structures (special purpose vehicles, joint ventures etc), they have a potentially broader application.

For firms who are intending to acquire or have acquired other firms, the introduction of Building Liability Orders presents a clear danger from the M&A perspective. It is no longer the case that the liabilities of a corporate entity will be confined within that entity, the courts now have the power to grant a Building Liability Order – Section 130 of the Building Safety Act 2022 permits liability for construction work to be extended to associated entities such as parent companies where it is just and equitable to do so.

Such orders can be made where there is a relevant liability under the Defective Premises Act 1972, Section 38 of the Building Act 1984 or any other claim arising from a relevant liability.

Building Liability Orders are currently in their infancy and therefore, it is unclear how and if they would be covered under insurance maintained by practices. In order to mitigate this risk, firms should be considering this risk at the acquisition stage and seeking to mitigate this, either through enhanced due diligence or by seeking greater guarantees.

Greater Environments Legislation

With an increased focus on environmental requirements, Environmental, Social and Governance reporting and a drive toward net zero, greater pressures are being put on firms to comply with the same and ensure that projects comply with these requirements. Over the past few years, we have seen the introduction of

1. The Environment Act 2021: A landmark piece of legislation within the United Kingdom, which sets out targets and establishes a framework for environmental protection and reporting. Additionally, this imposes significant requirements around Biodiversity Net Gain^[1] and pollution.
2. The Climate Change Act 2008 (Amended 2019 and 2021): Requires the United Kingdom to reach net zero greenhouse gas emissions by 2050.
3. The Building Safety Act 2022:
4. Environmental, Social, and Governance (ESG) Reporting: Many companies are now required to provide ESG reports. Whilst this is not necessarily a legislative requirement. Engineers involved in large projects will need to be aware of these ESG criteria and design projects that meet these standards, particularly in relation to reducing environmental impact and ensuring sustainability.
5. The Energy Efficiency (Private Rented Sector) (England and Wales) Regulations 2020: These regulations, which require private landlords to ensure that their properties meet minimum energy efficiency standards (a rating of at least E on the Energy Performance Certificate^[2]). This has implications for engineers involved in property maintenance, retrofit, and renovation projects – particularly where firms must assess and implement energy-saving measures to meet these standards, such as insulation, energy-efficient heating systems, and renewable energy solutions.

Cumulatively, the above has the impact of altering the traditional risks faced by designers and introduces a new set of requirements and areas where firms may face claims. As these requirements become more common within contracts, firms should ensure that they have the competency to comply with the same and where they do not, they may consider sub-contracting certain elements to specialists.

Innovation

Innovation within choice of materials and construction techniques brings with it a claims risk.

As firms continue to innovate with new materials in order to comply with budgets, environmental policies (referenced above) and client requirements, there is an increased risk that less well tested solutions and/or materials being used in projects inherently creates an increased claims risk.

One example being the drive to reduce embodied carbon within new developments, with some firms seek to use timber, vs materials such as masonry or concrete.

There is also an increased risk from an insurance perspective – Insurers are familiar with traditional construction methods and materials and understand the risks which they pose. Should a new material or method bring with it an adverse claims position, there is the potential for firms to see new restrictions being placed on their insurance going forward. It is also not only the firms insurance in consideration, the insurability of the building or project as a whole may be a consideration.

It is important engineers to be not only competent in the use of a range of materials but also to be able to demonstrate an awareness of the potential risks and opportunities associated with their material choices.