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The final part of our series on construction risk deals with placing the risk itself. For partially completed projects, we’re often asked where the risk actually sits.
If a project is practically complete, then it should ideally be placed on a property policy, rather than kept attached to a contractor’s all-risks (CAR policy). If it is an existing structure tied to a project, it will typically remain so unless the existing property forms part of a portfolio of property. In this case, the existing property insurer could choose to take on this risk whilst the works have ceased, but this is at the discretion of the individual insurer.
Whether or not they choose to take on the risk will largely depend on which of the measures outlined previously in this series have been put into place. Presenting the best risk to a property insurer will garner much better prospects for continuation of cover, even if it is on reduced perils or increased excess/deductibles.
Although we aren’t yet in a situation where building inspectors and risk engineers are prohibited from visiting a site to sign a building off, if that becomes the case there may be some short term solutions including drone surveys, which can provide a zero contact full view of a property in some instances even when a project is part way through. A drone can provide a HD view of the risk as it stands including any weather damage, security or other issues. Alternatively, a pass-by survey can be completed without leaving a vehicle, it may not be the best solution but will provide all parties concerned with some measure of comfort around the site being in the state it was left in.
Linked to this, it is important for all parties to be aware of what covers are in place and what the Policy triggers are, for example:
CAR – material damage
TPL – public and TPPD
Delay in Start-Up
For the most part, the Cessation of Works extension in most wordings will be the first port of call and you should be asking the following questions; how many days does it give? What is the notification period? What does this mean given the current insurances in place?
In the first two parts of this series I outlined some best practice advice that construction site owners should be taking to secure vacant sites and ensure a range of risks are mitigated as far as possible. Knowing not only what covers are in operation, but also how they work given the current situation will reduce the potential for gaps in cover.
One of the biggest challenges we tend to hear is around the cost of implementing some of these measures. Cost is a key element and all insureds are price sensitive, particularly in a time like this when no revenue is being generated at the pace it previously was.
But it’s important to stress that the outlay involved in securing a site can pale against the cost of any potential claim. As an example, on the inevitable “it costs too much” argument is that a security guard can cost £1,400 a week, a security camera system can cost as little as £250 a week with a 360 degree birds-eye telecamera situated centrally, with four or more static cameras, a police response and a user app/voice control all within that price.
Compare these costs to a large claim. For example, I have worked on malicious damage claims where vandals gained access to a site and proceeded to smash their way through as much as possible until they got bored, causing a claim in excess of £200,000 and a month-long set back. I have also seen unoccupied property claims where an existing structure was used illegally as a refuge, with a fire starting shortly thereafter, this resulted in a total loss of the existing property.
It’s important to remember that a lot of these measures are best practice even when the site is active, so there should be little if any cost involved in keeping a clean and tidy site, removing waste and having the right hoarding in place from the procurement and costing stage rather than retrospectively trying to make a bad site better as this will inevitably cost more money.
In this time of flux, it is important for us all to remember that many construction site owners will face challenges they were not prepared for at the time of the original quote, whether it’s the sudden cessation of the project or delays caused by depletion of the workforce. As brokers, it’s important that any changes in the risk are reported to you as soon as possible and that you know the potential hotspots that need to be addressed.
I hope this series has given some insights into the additional risks faced by these sites, but please feel free to contact me for any more advice or guidance.
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