an insurance officers guide to construction contracts ginny hope

AN INSURANCE OFFICER’S GUIDE TO CONSTRUCTION

CONTRACTS

GINNY HOPE

WHEN DO YOU KNOW ABOUT NEW BUILDINGS

OR MAJOR REFURBISHMENTS?

At planning or design stage?

Prior to contract issue?

When works start?

When building finished?

The day it burns down?

TODAY’S PROGRAMME

1. DESIGN / PLANNING STAGE

2. CONTRACT ISSUE

3. INSURANCE PLACING

DESIGN/PLANNING - Get your insurers involved

- Risk aggregation – link bridges?

- Compartmentation

- Alarms

- Sprinklers/gas extinguishment

- Cladding materials – combustible?

- Bin storage

CONTRACT STAGE• Professional indemnity risks

• Who is insuring the works?

• How much liability cover?

• Who is insuring the existing building?

• What about adjacent property?

• Advance profits?

SOME CONTRACTS

• JCT

• GC Works

• NEC

NB: DIFFERENT VERSIONS OF EACH. BEWARE!

SOME CONTRACTS

JCT - Advantages•Widely used & ‘understood’

•Contractors like it

•Lots of case law

•Good for minor works and refurbishments

WATCH OUT FOR

JCT

INSURANCE OF EXISTING BUILDINGS

JCT

WATCH OUT FOR

JOINT NAMES PROVISIONS

ACTION ON EXISTING BUILDINGS

• Delete the Joint names requirement OR

• Ask your insurers to include cover e.g. Zurich PART C Works in Progress

Section 2 – Property Insured

a) Works in Progress

b) Existing BUILDINGS and their CONTENTS insured under Part A but only during the period in which the BUILDINGS are undergoing alterations or additions including any agreed period for maintenance or making good defects.

JCT

WATCH OUT FOR

SUB-CONTRACTORS’ WORKS COVER – DEFINED PERILS ONLY

FIRE/LIGHTNING

EXPLOSION

STORM

FLOOD

BURST PIPES

EARTHQUAKE

AIRCRAFT

RIOT

CIVIL COMMOTION

JCT

WATCH OUT FOR

ANY 21-2-1 REQUIREMENT

SOME CONTRACTS

GC WORKS

• Public sector contract; favours the Employer

• Contractors dislike it

• Needs modifying to suit HE

GC WORKS

• ALTERNATIVES B & C (AVOID JOINT NAMES PL)

• NO PROVISION FOR NON-NEGLIGENT COLLAPSE (21-2-1)

WATCH OUT FOR

SOME CONTRACTS

NEC

• Relatively new – not widely known

• Plain English

• Little case law yet

• Needs adaptation for refurb works

NEC

• 80.1 Employer responsible for riot damage

• 84.2 Joint names EL/PL

• No provision for non-negligent collapse

WATCH OUT FOR

INSURANCE PLACING

CONTRACT WORKS

• Recommend some automatic provision for small contracts

• Don’t forget the terrorism cover

• Sum insured

• Free issue materials

• Any special risks? E.g. water transits

• Completion date – when?

CONTRACTOR’S PL & PI

• What limit required?

• Novation issues (PI)

• Collateral warranties?

EXISTING BUILDING

• JCT? Do you need joint names cover?

• Protecting contents during Works

• Sum insured after completion

21-2-1

• Why needed?

21-2-1

• Architect may specify requirement

• Consider ground conditions, nature of works, neighbouring property/facilities

• Limit?

• No standard wording for GC Works or NEC

CONCLUSION

• Get involved early

• Keep checking developments

• Diary for completion