INSURANCE ADVICE
ABL GROUP EXECUTIVE DIRECTOR TREVOR MCCLINTOCK OFFERS ADVICE ON CONTRACTORS ALL RISKS POLICIES AND DESIGN EXCLUSIONS TO LOOK OUT FOR… Does your policy cover the total cost of repairing damage?
Contractors All Risks policies respond to claims in respect of the cost of repairing physical damage to the contract works during the period up to practical completion. Because cover is arranged on an ‘All Risks’ basis, the insured has to demonstrate that the works have been damaged and quantify their loss. It is then down to the insurer to either meet the claim or provide a rationale as to why the cover does not apply – usually because either the particular cause of the loss is excluded, or because the insured has done something to invalidate his policy. All Contract Works policies have some level of exclusion relating to defective design, workmanship, or materials. However, the wording of these exclusions differs. Many policies will only exclude the cost of repairing or replacing the defective elements of the works, but will cover the damage to other parts of the works that result from the defect. This is known as a DE3 exclusion. Increasingly, contractors are buying wider cover, whereby in return for an increased excess and premium, the policy covers the total cost of repairing the damage. This includes the defective elements, and solely excludes the cost of improvements to the original design, workmanship and/or materials, ie betterment. This is known as a DE5 exclusion. I would strongly recommend the wider DE5 wording, particularly on larger projects, since in the event of a loss resulting from a defective design issue, contractors could potentially be footing a considerable proportion of the overall rectification cost. Once practical completion takes place, however, prime responsibility for loss or damage to the works passes from the contractor to the owner. Essentially cover provided under the Contract Works policy ceases at that point - including damage resulting from defective design. Depending on the
Trevor McClintock, Executive Director at ABL Group.
of overtime payments to employees to attempt to get the construction programme back on track. It won’t, however, meet the cost of any penalties that the contractor must pay to the owner, or any other party as a result of the project being late in achieving handover because of defective design or materials specification. Ready to find your solution? “Increasingly, contractors are buying wider cover, whereby in return for an increased excess and premium, the policy covers the total cost of repairing the damage.”
individual policy wording, it is normal that some residual cover will remain during the subsequent 12- or 24-month defects liability period, but this is likely to be restricted to one or more of: • Claims resulting from dealing with outstanding remaining works and snagging matters, and/or • Claims resulting from work undertaken during the period prior to practical completion, but where the damage occurs during the defects liability period. (Claims during this period resulting from defective design, materials and workmanship will be subject to the same exclusions as those occurring prior to practical completion.) The core Contract Works cover will only meet the direct cost of repairing the damage. It is possible to extend the policy to cover some additional costs that are incurred as a direct consequence of the damage, eg the cost of debris removal, and the cost
T: +44 (0)28 9099 3600 E: info@ablinsurance.co.uk www.abbeybondlovis.com
www.nibuilder.co.uk
FOLLOW US ON:
NI BUILDER | 67
Made with FlippingBook - professional solution for displaying marketing and sales documents online