T017 Insurance

DEFINITION
1. risk spreading mechanism
TWO MAIN TYPES OF INSURANCES
1. LOSS
  1. Consequential Loss
    1. used if there is a risk that a party suffering loss of revenue/ profit of any nature if completion of a project is delayed by fire or other insurable peril
  2. Contractors all risk
    1. physical damage all risk policy on the materials used in the construction works
    2. effective during contract up to PC - can b ext through an agreed maintenance period
  3. Financial cover for losses that fall directly on the insured party
2. LIABILITY
  1. Employers Liability
    1. covers the legal liability of the employer for any illness, injury or death suffered by their employees
    2. Annual basis - not for specific projects - but most EL insurance issued on 'cautation' basis.
    3. 'causation' basis = the policy is in force at the time any event giving rise to a claim is caused that will have to meet the claim
      1. e.g. illness may take years to surface
    4. if MC doesnt prove that he has taken out insurance - emp can take it out and charge MC
    5. compulsory since COMPULSORY INSURANCE ACT 1969
  2. Public Liability
    1. covers indemnity for damages/ compensation arising from accidental injury to 3rd parties (not employees) or accidental damage 2 property arising in connection with a project
    2. insurance from beginning to PC + maintenance period
    3. 'Occurrance' basis = the policy in force from the time of the injury/ damage will respond
  3. Professional Imdenity
    1. used for award of damages/costs/settlement for negligene
    2. IF NOTHING IS INSERTED = 'THE AGGREGATE AMOUNT FOR ANY ONE PERIOD OF INSURANCE'
    3. if NO is inserted then none is required
  4. financial cover for the legal liabilities that the insured party owes the others
SUBROGATION
1. Legal technique where the insurer steps into the shoes of the insured in order to take the benefit of any legal right or remedies that may have against 3rd party responsible for the loss
  1. use in loss insurances
JOINT NAMES
1. where the employer & contractor are insured under the same policy
2. it stops the insurer having the right of subrogation against the other party if they caused loss
JCT Insurances
1. Schedule 6 and 3
2. requires insurances to cover claims
3. INSURANCES ARE STATED IN THE CONTRACT PARTICULARS
DANGERS OF ADVISING ON INSURANCES
1. The case of Pozzolanic Lytag Ltd v Bryan Hobson Associates served to highlight the dangers of a construction practitioner taking on responsibility for insurance matters, even inadvertently
2. To protect against these risks
  1. include a specific exclusion with regard to advising on insurance in their terms of appointment
  2. never advise on insurance without qualifying that advice to the extent that it should be verified by an appropriately qualified and regulated specialist
THREE OPTIONS FOR INSURING THE WORKS IN JCT
1. OPTION A
  1. insurance of new works by contractor
  2. for new works
  3. the contractor takes out the insurance
  4. it is in joint names
  5. it maintained until PC
  6. the MC will only receive the value paid out by the insurers for reinstatement, if the cost is greater than that they bear the loss
  7. 'ALL RISKS'
2. OPTION B
  1. insurance of new work by employer
  2. for new works
  3. emp takes out policy
  4. it may be used by freq developers who may have a lower premium
  5. any reinstatement works r treated as a variation & the emp has 2 pay the actual value if that is more than the insurance policy they bear the cost
  6. 'ALL RISKS'
    1. any physical loss/ damage 2 work executed and site materials and against reasonable cost of the removal and disposal of debris
3. OPTION C
  1. Insurance of works to an existing building by the employer
  2. for works 2 extg structures
  3. joint names
  4. 'SPECIFIED PERILS'
    1. new works have 2 b insured for all risk and specified perils
      1. Specified perils are defined in clause 6.8 in JCT and inc fire/ lighting/ explosion/ flood/ storm/ earthquake/ riot & civil commotion
    2. the ext structure only has to be insured for specified perils
PROCEDURE IF LOSS/DAMAGE OCCURS
1. contractor notify CA sating nature/location & extent of damage
2. valuations of wrks take NO ACCOUNT of damage - as if nothing has happened
3. once insurers have made inspection the contractor should repair/restore/replace anything damaged b4 proceeding with works
4. MC paid for reinstatement works through interim certificates
5. under option A the contractor must enable the insurers to pay out
6. under options B & C they received the value of carrying out the works valued as a variation
TERRORISM COVER
1. insurance provided in joint names 4 physical loss/ damage to work executed, site materials, ext structures & contents caused by terrrorism
2. JCT clause 6.8
3. PROCEDURE IF COVER IS NOT AVAILABLE
  1. immediately inform the other party that cover has ceased
  2. b4 expiry - emp has to notify the MC in writing that they either want the works 2 b carried out or terminate the MC contract.
  3. if the contract is not terminate and works suffer loss/damage from terroism
    1. the MC shall repair/restore/replace damaged work and proceed with the works
    2. reinstatement to be treated as a variation
    3. £ not 2 b reduced due to any act of negligence on the part of MC
    4. in the case of ext buildings, the work must b reinstated but any damage to ext structures is not obliged 2 b reinstated
4. applicable for options A B C
JOINT FIRE CODE
1. set out standards & procedures 2 b followed 2 min the occurences of accidental/ malicious fires
2. reduce the incidences of fire in construction related work. by designing out taking simple precautions & adopting safe working practices it argues that the majority of fire c b prevented
3. JCT clauses 6.13 to 6.16
4. insurance company requires it and it can make a policy cheaper
5. Applies to Contract values over £2.5m bit insurance companies also want it 4 smaller projects
6. LARGE PROJECT = over £20m or a smaller proj if req by insurers - they always decide
7. if prj if LARGE its stated in contract particulars
8. the MC has to provide bells/whistles/portable fire ext etc if code applies
9. if the proj is really large - MC provides fire marshalls
10. the emp is responsible to getting their people to complie and vise versa for MC people
11. PROCCES FOR NON-COMPLIANCE WITH CODE
  1. MC must carry out req remedial measures of the insurerer by the req date
  2. if a variation is req. 4 remedial measures it should be issued
  3. if MC doesn't begin remedial wrks in 7days the emp can employ others and charge the MC for the expense
12. A FIRE INSURANCE valuation should be the value of reinstatement works
  1. inc. cost of demos/ cleaning away/ rebuilding the ext design in modern materials using modern methods 2 a stndard equal 2 the existing property & in accordance with current building regs

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