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The insurance section within a Joint Contracts Tribunal (JCT) Contract can test even the most experienced construction insurance intermediary. As well as understanding the requirements and complexities of the JCT Contract and your clients’ issues and liabilities, you must consider other parties’ exposures. Only then will the insurance you arrange be appropriate for all.
In this piece, Rob Aston, senior underwriter at construction and engineering Managing General Agent, Ensurance UK, explains the insurance requirements of a JCT Standard Building Contract with Quantities 2016 – typically used in large or complex construction projects.
He gives a basic overview, discussing: the cover needs, responsibilities and liabilities of the employer (project owner) and the contractor, when a joint names policy is required and the benefits of this arrangement.
Rob scrutinises areas where intermediaries need to be prudent and plug any exposure gaps. For example, only contractors are required to insure against injury/death via employers and third-party liability cover, even though employers may own the land/property and temporarily be on site.
Having recommended intermediaries discuss this issue with the employers, particularly as their previously-arranged cover may have restrictions, Rob looks at breakdown cover- something traditionally excluded from the standard construction/engineering all risks approach.
Breakdown is not mentioned within the JCT definition, leaving clear exposures if plant, machinery and other moving parts that form part of a project.
He also touches upon third-party definitions and how if the employer takes out a joint-named policy for existing structure and construction works, the contractor only needs third-party cover for property owned by an external party. Rob concedes that while the intermediary representing the employer has no responsibility to point this out to the contractor, it’s good practice to do so.
This is the contractors’ exposure and in general, the same applies to 6.5.1 cover (named after the JCT section it falls within), relating to natural damage caused by landslip, subsidence, collapse etc.
Although the JCT states ‘the contractor must take out and maintain the insurance for the benefit of both parties’, some project insurance says it’s the duty of the employer to arrange 6.5.1 cover. The intermediary should therefore assess the exposures and whether the contractor has the appropriate cover.
The piece concludes on the importance of paying attention to detail and avoiding duplication (particularly with sub-contractor cover), and how even when the insurance is arranged, the intermediary’s role hasn’t ended. Contract evidence, mechanisms to report losses and providing post-completion professional indemnity are all vital.
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