Insurances Flashcards
(20 cards)
What are the 2 types of insurance and explain the differences between them?
Liability:Under a liability insurance policy, an insurer undertakes that, if the insured person (the client) becomes legally liable to someone else (the ‘victim’), the insurer will indemnify the client against damages and legal costs which become payable.
Loss: under a loss insurance policy, the insured person is entitled to be compensated by the insurers for loss or damage which that person has suffered, whether this is caused accidentally or by someone else’s negligence
What construction risks need to be considered by contracts?
- injuries to the contractor’s and/or employer’s employees
- injuries to third parties
- damage to the employer’s or third party property
- damage to the works
- faulty materials and workmanship thefts and vandalism
- design defects
- professional negligence
What is the reason for insurance in a standard form of contract?
Contracts are a permanent feature of the industry and control the allocation of risk and insurance responsibility. Be covered for allocated
risks.
What are the main risks to a project (in relation to health&safety?
injury trips falls and slips, death, asbestos poisoning, fire
working with heavy tools etc
Explain the difference between indemnity and insurance?
Liability : Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy.
Indemnity: Indemnity insurance is a contractual agreement in which one party guarantees compensation for actual or potential losses or damages sustained by another party.
Explain the different types of insurance required under JCT 16 relating to people and property. If you were working for a Client what length of cover would you advise and why?
covered under section 6 clauses:
Clause 6.1: States that the contractor is responsible and requires it to indemnify the employer for any expense, liability, loss, claim or proceedings that arise from personal injury or death caused by the work carried out during the building project. The only exception to this is if the personal injury or death is due to any act or neglect by the employer.
clause 6.2 requires the contractor to indemnify the employer for property damage, which only includes the structure on the building site. However, the clause does exclude damage to the building materials and damage to any existing property of the employer. The contractor is only liable if the property damage is due to negligence, breach of statutory duty, omission, or default.
Clause 6.4: Requires that the contractor take out and maintain insurance for the duration of the building project that covers their liabilities under clauses 6.1 and 6.2, which would include employers’ liability and public liability.
6.3(exisiting buildings)
Cl 6.1 - 6.3 – indemnity
Cl 6.4 - insurance of MC liability
Places responsibility of contractors to take out and
maintain insurance
6.6: excepted risks
advise to take out insurance for the extent of the works to be covered. and dependant whether under hand contract (6 years) or deed (12 years)
Explain the different types of works insurance required under JCT 16. What is the length of cover required and why?
clause 6.7 insurance of works
- 2 classes of insurable risks
- Specified Perils
- All Risks Insurance
Three options:
A: new buildings: contractor bares the risk and takes out insurance, subbies included in policy, joint names between employer and contractor and covers all risks
B: new buildings all risks taken out by the employer
C: Option C. This option is used in the case of alterations of, or extensions to, existing structures. This option provides for the Employer to insure both the works and the existing structures.
Employer to take out and maintain insurance to cover
damage to the works and the existing structureCan choose to insure against Specified Perils rather than
All Risks for existing structures and no need to
protect sub-contractors against subrogation
Name 2 insurances required by UK law.
Employers Liability Insurance
Professional Indemnity insurance
Public liability insurance is generally required of contractors to provide cover against personal injury or death, or loss or damage to property of third parties such as members of the public or independent sub-contractors.
Why is it important that QS’s advise a client on the insurance provisions required? What should you look for when assessing the cover?
under a duty of care as professional to advise the client on best working practices:
- Clients are informed of their obligations
- Most suitable insurance clauses are used
- Policies comply with contract conditions
- Correct procedures adopted when a claim is required
look at all potential risks when assessing, and all contractual points.
Who is responsible if damage to adjacent property occurs but neither the Emp or MC are negligent? What can the Emp do to cover this risk?
The law currently states the property owner could be held liable and have to face the inevitable financial consequences.
Employer digression to take out this insurance:
in suburban or built-up areas where piling, excavation, underpinning or basement works are being undertaken, it must be seriously considered in view of the liability to which the Employer is exposed.
The cover is arranged in the joint names of the Contractor and the Employer and will protect the latter against liability for loss, claims or proceedings that arise due to ‘non-negligent’ damage to adjacent property whilst undertaking a building contract.
take out non negligent insurance
the contractor takes out a policy that protects the developer in respect of any expense, liability, loss, claim or proceedings incurred as a result of damage to property from the works being undertaken due to; collapse, subsidence, heave, vibration, weakening or removal of support and lowering of ground water.
or ensure that the contractor has all risk insurance policy,a policy that covers all risks normally associated with a construction project. This will apply should a builder cause damage to the site or adjacent property while carrying out works. (public liability risk)
If the Employer has paid for materials on site which are subsequently stolen who is liable for their replacement (JCT SBC 16) and why?
materials are covered by works insurance, but it is dependent on the contract and the intention of the parties as the law states unless the contract states otherwise, title (ownership) of materials passes from the contractor to the client at the time of delivery, irrespective of whether payment has been made.
(check security requirements in policy)
What if the insured goes bankrupt and you have a right to claim against him?
What if the insured has missed a payment?
third party rights allowing you to claim or have it in joint names to claim against the insurance rather than the company or contractor who has gone bankrupt
missed payment- will void the insurance if not repaid in certain time frame.
If the risk holder does not take out the insurance what can you do?
Who is liable for any shortfall and why?
they will be personally liable as insurance has not been taken out and if decline to pay for any claim take out of next payment as the risk holder did not take out insurance to cover for ones risk.
Why do standard forms of contracts ask for policies to be taken out in joint names?
The key feature of this type of policy is that the insured parties are unable to claim against one another in respect of an insured loss, as they are considered to be one-and-the-same for the purposes of the insurance.
They just claim against the insurance rather than one another.
What is the difference between all risks and specified perils?
-This insurance may cover all risks, or may be restricted to certain ‘specified perils.’
Specified perils tend to be significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding and so on. Specified states what is covered by insurance.
all risks cover a variety of issues and will state what is not covered.
What are Excepted Risks?
Excepted Risks are risks that are agreed might occur which insurance is unobtainable and both parties agree if these occur it will be no fault of their own.
some examples are: Riot, war, invasion, act of foreign enemies or hostilities. Civil war, rebellion, revolution, insurrection or military or usurped power (not including terrorism). Radiation or contamination by radioactivity.
Pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds.
Explain the reinstatement procedure for works insurance Option A and B.
cover the full reinstatement value of the works, plus any percentage stated in the
contract particulars to cover professional fees default rate 15%.
Option A –
• Contractor gives written notice
• Full valuation carried out
• Insurers inspection
• Reinstatement of the works
• Contractor authorises insurer to pay all sums to
Employer
• Contractor is paid by the Employer in instalments
for the reinstatement work
• Payment cannot exceed what has been received
by insurer
Option B –
• Reinstatement works treated as a variation to the
contract
• Payment not governed by limit of monies received
from insurance
A Client has received notification from the contractor that terrorism cover has been halted by its insurance broker. How would you advise the Client?
If insurers cease this cover the notified party must
inform the other party
Employer to decide whether to continue with the works
If NO contract is terminated
If YES – any subsequent damage treated as a variation
Timing of notice important!!!
What are the advantages of using the Joint fire code? If the contractor breaches the code what action should be taken by the contract administrator?
Optional clause
Imposes certain obligations on Employer, MC etc
Designed to reduce incidents of fire
Compliance with the code reduces cost of insurance
policies
failure to comply with the code could then result in the withdrawal of insurance which might be considered a breach of contract. contract administrator should notify contractor to make amendments asap or will be considered breach of contract.
How would you advise the Client on the financial limitations of insurances required for a project and why?
not all insurance is compulsory so choose wisely and ensure that the client knows that if not ensured as risk holder then the shortfall will fall on them and they will be personally liable
