Insurances Flashcards
What is the reason for insurance in a standard form of contract? What are the main risks to a
project (in relation to health & safety) ?
Ensure that financial backing is there if an incident were to occur
Explain the difference between indemnity and insurance?
Indemnities are used to allocate risk. Promise to cover the other parties losses
Insurances are taken out to protect against the allocated risk. The financial backing to the indemnified risk
What are the 2 types of insurance and explain the differences between them?
Liability - policy only covers the victim and (pay against liability only) is only active once the insured has been held liabile. Evidence/Proof e.g. A 3rd party motor insurance which covers the victim but not the insured
Loss - Covers for the loss of the insured as well as any costs liable to the other party. E.g. Fully comp car insurance (Covers both drivers losses)
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?
Works insurance - Contractors All risks
Insurance cover should range from possession of the site until practical completion, Can also request for cover to extend to end of defects
Explain the different types of works insurance (loss) required under JCT 16. What is the length of cover
required and why?
A - New Buildings - Main Contractor takes out the insurance - Joint Names & All Risks
Joint names (Client, Contractor, Subcontractors)
B - New Buildings - Employer Takes out the insurance - All Risks & Joint Names taken out by the employer
C - Extg building - Employer takes out the insurance - 2 strands
1st option - All risks joint names for the contract works
2nd option - Specified Perils rather than all risks insurances
Insurance cover should range from possession of the site until practical completion, Can also request for cover to extend to end of defects
Why is it important that QS’s advise a client on the insurance provisions required? What should you
look for when assessing the cover?
To ensure that the level of cover is sufficient
Should look out for whether it is a bespoke policy or annual policy, max level of cover, cost and any exclusions. The excess might be too high. Should cover for loss
What is the difference between all risks and specified perils?
Specified perils cover for natural disasters etc. And covers for only what it says it will cover
All risks cover for everything but exceptions such as design defects, wear and tear etc.
If the risk holder does not take out the insurance what can you do?
The other party would take out the required insurance and add/take the cost from the next valuation
Who is liable for any shortfall and why?
The contractor would be liable as they should have taken out the policy
Who is responsible if damage to adjacent property occurs but neither the EMP or MC are negligent?
Employer would be liable for damages to an adjacent property where neither party has undertaken a negligent action as they are the owner of the property
The employer can ask the MC to take out insurance for this which is known has non-negligent insurance. Which is generally cheaper than the Client taking out insurance for this potential event
If the Employer has paid for materials on site which are subsequently stolen who is liable (JCT SBC
16) and why?
JCT Standard Building Contract 2009 Clause 2.24 states that if the architect has certified the value of materials on site and the employer has paid for them then the materials automatically become the property of the employer, but the contractor is contractually liable for loss or damage to these materials.
Why do standard forms of contracts ask for policies to be taken out in joint names?
Prevents Subrogation
What are Excepted Risks?
Excepted risks are covered by the client
• The use or occupation of the works by the
employer, its agents, servants or contractors.
Any fault, defect, error or omission in the design
of the works (other than design provided by the
contractor)
Explain the reinstatement procedure for works insurance Option A and B.
A- MC gives Written notice, Client QS Values the works undertaken up to the point of the damage caused. Client pays contractor for work undertaken as valued. Insurers inspect work and advise reinstatement cost. Contractor approves reinstatement cost and advises insurer to pay client. Contractor no loss and will be paid the reinstatement cost by the client as works are undertaken. As contractor accepted reinstatement costs they can only be paid upto that amount even if it costs them more
B- Similar to above however reinstatement goes straight to client and is approved by them. Costs that exceed the insured amount will be covered by the client.
A Client has received notification from the contractor that terrorism cover has been halted by its
insurance broker. How would you advise the Client?
Client should try to take out their own cover and charge back to contractor. If client can’t obtain cover there is 2 options:
- Terminate the contract before the cessation date (before the cover runs out) If there is no termination it is deemed that client is proceeding with option 2
- Accept the uninsured risk and cover any reinstatement costs
What is meant by the term subrogation? What can you do to safeguard against it?
Subrogation is the right of most insurance carriers to legally pursue a third party that caused an insurance loss to the insured
A Joint names policy means that losses cannot be claimed back as the parties are under the same insurance policy.
Waiver of subrogation (when you don’t know who the subcontractors are when taking out the policy) is a contractual provision whereby the insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party
