Insurances Flashcards
What is the main function of contracts? Can you tell me what are the main risks to a project in terms of people and property?
Function of contracts – allocate risk to the most suitable party able to manage that risk by giving legal liability to people to cover someone’s losses
Main risks – damage to property, injury/death to people, theft, vandalism, bad workmanship
Explain the difference between indemnity and insurance?
Indemnity - the promise to cover the other parties’ losses in case an act has been carried out that you are going to be liable for (e.g. get into a car, you are indemnifying everyone that if you cause any damage, you are liable to pay out any costs associated with that)
Insurance – The financial backing to this promise so always need this insurance to back up the indemnity
Key difference is that you can have indemnity without an insurance policy but cant be the other way round
What are the 2 types of insurance and explain the differences between them?
Liability – provides an insured party with protection against claims resulting from injuries and damage to other people or property. Liability insurance policies cover any legal costs and pay-outs an insured party is responsible for if they are found legally liable.
Works/Loss – will pay out once a claim has occurred, don’t need to prove liability. If it turns out to be wrong, they will chase the person who is actually liable to recoup the money.
Explain the different types of works insurance required under JCT 16. What is the length of cover required and why?
Option A – new build, taken out by MC under joint names all risk policy
Option B – new build, taken out by Employer under joint names all risk policy
Option C (2 strands) – refurb, taken out by Employer under joint names all risk policy (works insurance) , also employer can reduce amount of cover it has to insure the existing structure and can emit the sub-contractor and/or reduce to specified perils
- employer would take out c1 replacement schedule
if doesn't own the building
All insured to end of practical completion
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.
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
Who is responsible if damage to an adjacent property occurs but neither the Emp or MC are negligent? What can the Emp do to cover this risk?
Employer is liable as they are the occupier under common law
To cover this risk, apply clause 6.5 which is an optional clause that is an insurance policy which is taken out by the MC on behalf of the Emp that covers this non negligence situation and the employer is covered and aren’t the risk holder. If it were MC fault it would be covered in CL6.2, if not, take out CL6.5 so covered either way.
A Client has received notification from the contractor that terrorism cover has been halted by its insurance broker. How would you advise the Client?
Either to require in writing that the Works continue to be carried out, but any subsequent damage, MC gets paid for the works and is treated as a variation
- employer may instruct the contractor to take out
any other terrorism cover which the contractor
can reasonably obtain
Specify that the contractor’s employment will terminate on a date after the date of the insurer’s notification, but before the date of cessation of cover
If the Employer has paid for materials on site which are subsequently stolen who is liable (JCT SBC 16) and why?
Insurance of the works falls into 2 categories (New Works and work to existing structures) with 3 options (clause 6.7) so depends on which one is selected in contract particulars as to who is liable.
A= CONTRACTOR, B= EMPLOYER, C= EMPLOYER
What if the insured goes bankrupt and you have a right to claim against him? What if the insured has missed a payment?
Can step into the shoes of the person that has gone bankrupt and claim the benefit of that policy – third party rights – only transfers the rights that the insured would have had, you lose your rights as soon as you do something not in accordance
If the risk holder does not take out the insurance what can you do? Who is liable for any shortfall and why?
The other party may take out and maintain the appropriate insurance, deducting the cost from monies due or to become due to the risk holder from next interim valuation or send invoice
Risk holder is liable for any shortfall because they are the risk holder had the option to take it out and increase the policy value to cover it
Why do standard forms of contracts ask for policies to be taken out in joint names?
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.
Subrogation
What is the difference between all risks and 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?
The contractor is not to have any liability and lies with employer in respect of injury or damage to any person, the Works, site, or any property caused by:
-ionising radiation.
-contamination by radioactivity from any nuclear
fuel or from any nuclear waste from the
combustion of nuclear fuels, radioactive toxic
explosive or other hazardous properties of any
explosive nuclear assembly or component unless
it is included in terrorism cover.
-pressure waves caused by aircraft or other aerial
devices travelling at sonic or
supersonic speeds
-act of terrorism which is not within the terrorism
cover taken out under the contract.
Explain the reinstatement procedure for works insurance Option A and B.
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
