qbe presentation to umal
TRANSCRIPT
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Insurance provisions under JCT 1998
and JCT Standard Building Contract
2005
Brian Lewis – QBE CAR
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Introduction Most Construction is carried out under a standard form of
contract with majority of commercial work using JCT.
A Contractor‟s obligations under a Contract to indemnify theEmployer or to reinstate any damage to the Works and Site
Materials are of no effect unless the Contractor has adequate
funds.
It is normally a requirement of a Contract for insurance to be
taken out to support the indemnity requirements of the
Contract.
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Risks in Construction
• Diverse trades working in close proximity
• Physical hazards
• Complicated chains of liability / responsibility
• Can lead to complex claims
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Insurance & JCT
Changes in format but not to the insurance provisions which
are now included within a schedule rather than the body of the
contract.
Joint Names definition and position of sub-contractors
clarified
JCT 1998 – arbitration, whereas 2005 has litigation as adefault position with arbitration as an agreement between
parties
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Indemnity Clauses
• Clause 20.1 - Requires the Contractor to indemnify the
Employer for injury on site
•
Clause 20.2 - Requires the Contractor to indemnify theemployer for liability for injury and damage to real and
personal property arising out of or in the course of or by
reason of the carrying out of the works ( taking into account
the minimum stated in the appendix)
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Clause 21.1.
Requirement to insure the Contractor’s liability for death
and personal injury to:
• its own direct employees (The minimum insurance cover is asstated in the Employer‟s Liability (Compulsory Insurance)
Act.), and
• any other person whomsoever arising out of or in the course of
or caused by the carrying out of the Works. (The minimum
insurance cover against injury and/or death of people other
than his own employees must comply with the minimum
amount of cover stated in the Appendix to the Contract.)
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Clause 21.2
• Obligation on the Contractor to take out joint names insurance
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Clause Number: 22A, 22B or 22C • For Damage to the Works and Site Materials, there are three
options under this heading.
•
Clause 22A is intended for projects involving new work wherethe intention of the parties is that the Contractor is to be
responsible for the insurance. This is to be a Joint Names
Policy (i.e. the Contractor and the Employer). The minimum
amount of cover should be the full reinstatement value of the
Works plus a percentage for professional fees. This percentageis to be stated in the Appendix to the Contract.
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• Clause 22B is also intended for new work but where it is the
Employer who is responsible for obtaining the cover. This is
also to be a Joint Names Policy (i.e. the Employer and the
Contractor). The minimum amount of cover should be the full
reinstatement value of the Works plus a percentage for professional fees. This percentage is to be stated in the
Appendix to the Contract.
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• Clause 22C is to be used where the work consists of
refurbishment of, or modifications to, or extensions of existing
structures. In this situation it is the Employer that is
responsible for the Joint Names All Risk Insurance of the
Works (under Clause 22C.2). The minimum amount of cover should be the full reinstatement value of the Works plus a
percentage for professional fees. This percentage is to be
stated in the Appendix to the Contract.
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• Each of the above insurances are to be “All Risk” insurances.
“All Risk” insurances are defined in Clause 22.2 as “insurance
which provides cover against physical loss or damage to work
executed and Site Materials”. However, a long list of
exceptions are included, and it is apparent that “All Risk”insurance does not in any way cover all risks of damage to the
Works and Site Materials, and the term “All Risk” insurance is
therefore a misnomer
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Clause Number: 22C.1 • Damage to existing structures and their contents arising
from the Specified Perils (applies to contracts involving
extensions or refurbishment of existing structures).
• Under Clause 22C.1, the Employer is to take out and maintain
a Joint Names Policy against damage to the existing structures
and their contents from the Specified Perils. The Specified
Perils are defined under Clause 1.3 of JCT ‟98.
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Clause Number: 22D • The Employer’s loss of liquidated damages arising from
extension of time for ‘loss or damage occasioned by any
one or more of the Specified Perils’.
• Under Clause 25.4.3 of JCT ‟98, loss or damage caused by any
of the Specified Perils is a Relevant Event which gives a
Contractor the right to an Extension of Time. In such a
circumstance, the Employer would not be able to recover
Liquidated Damages from the Contractor but would still incur losses from the delay in completion.
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• In situations where the Employer cannot avoid liability for
delay and the risk of delay from the Specified Perils is
significant, insurance may be his best course of action.
• Clause 22D insurance is designed for this type of situation. It
applies only if it is indicated in the Appendix to the Contract
that insurance under that clause may be required. The
maximum period of delay to be insured against is also to be
stated there
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Clause Number: 30.3 • Loss or damage to off-site materials or goods from the
Specified Perils.
•
Under Clause 30.3, the value of off-site materials that are onthe list of materials annexed to the Contract Bills and intended
for the Contract may be included in interim certificates. A pre-
condition for such inclusion is that such materials are insured
for their full value against damage or loss from the Specified
Perils. The Specified Perils are defined under Clause 1.3 of JCT ‟98.
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Clause 21.2.1. • Injury or damage to property due to collapse, subsidence,
vibrations, weakening or removal of support or lowering of
groundwater attributable to the carrying out of the Works.
• The Contractor is only responsible for damage to property due
to negligence, breach of statutory duty, omissions or default on
the part of the Contractor or of whom the Contractor is
responsible in law.
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• Sometimes damage can occur without any fault on the part of
the Contractor, and Clause 21.2.1 envisages that a prudent
Employer may wish to insure against this type of liability.
• If that is the case, it should be indicated in the Appendix to the
Contract that Clause 21.2.1 insurance may be required, and the
amount of cover required, per occurrence or series of
occurrences arising from the same event, must also be stated.
• The insurance must be in the joint names of the Contractor and
the Employer and must be placed with insurers approved by
the Employer
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21.2.1 Insurance
• Cover is normally arranged with the Contractor's Public
Liability insurer rather than in isolation and covers injury or
damage to any property, caused by collapse, subsidence,
heave, vibration, weakening or removal of support or lowering
of ground water and arising from the carrying out of theworks.
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21.2.1 Insurance
• The usual exclusions for these policies include but are not
limited to:
• Damage to the works and materials – something that should be
covered by the Contract Works insurance.
• Losses arising from the contractors negligence - something
that should be covered by the Contractor's Public Liability
insurance.
• Losses due to errors and omissions in the designing of the
works - something that should be covered by the Architect's
Professional Indemnity insurance
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Conclusions • From the above summary it is apparent that the insurance
provisions remain much the same
•
JCT 2005 has been re-scheduled with the intention of makingit more “user friendly”, but the substance of the contract
(particularly in respect of the insurance provisions) remains
very much as JCT ‟98.
• Although the JCT insurance clauses may still appear
cumbersome or „wordy‟ to some, it is obviously very difficult
to cover all aspects of the insurance provisions in a few words.
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Other Issues for Insurers
• Suitability of insurance Carried
(Limits / Who with / Security / Evidence)
•
BFSC – control / evidence that insurances are checked?
• Site security / contractor‟s care of their own property?
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Comparison of Insurance provisions from JCT’ 98 to JCT
2005. • JCT ’98 Clause number: 21.1.1.1 / JCT 2005 Clause
number: 6.4.1 - Effectively the same insurance liability under
JCT 2005 as existed under JCT ‟98.
• JCT ’98 Clause number: 21.2.1 / JCT 2005 Clause
number: 6.5.1 - Effectively the same insurance liability under
JCT 2005 as existed under JCT ‟98.
• JCT ’98 Clause number: 22A, 22B or 22C / JCT 2005
Clause number: Clause 7.6, Schedule 3 Options A. B or C.
- Effectively the same insurance liability under JCT 2005 as
existed under JCT ‟98.
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• JCT ’98 Clause number: 22C.1 / JCT 2005 Clause
number: Clause 6.7, Schedule 3 Option C Clause C.1 -
Effectively the same insurance liability under JCT 2005 as
existed under JCT ‟98.
• JCT ’98 Clause number: 22D / JCT 2005 Clause number:
N/A - The option of insurance for the Employer‟s loss of
Liquidated Damages in the event of delays caused by loss or
damage occasioned by any of the Specified Perils, does notappear in JCT 2005.
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• JCT ’98 Clause number: 30.3 / JCT 2005 Clause number:
4.17.2.2 - Effectively the same insurance liability under JCT
2005 as existed under JCT ‟98.
• JCT ’98 Clause number: N/A / JCT 2005 Clause number:
6.11 - Where there is a Contractor‟s Designed Portion, the
Contractor shall forthwith after the Contract has been entered
into take out a Professional Indemnity insurance policy with a
limit of indemnity of the type and in an amount not less thanthat stated in the Contract Particulars.