Title,Risk,Insurance

Question 1

What is a Title?

Answer 1

A title is an ownership of assets on AND off site. When an insolvency of a party occurs, another may be able to claim for the title of the assets if it has been expressed in the contract’s terms and conditions.

Question 2

What does indemnity mean? Give an example of it

Answer 2

An indemnity is usually a sum paid by an entity say A to
another entity say B by way of compensation for a particular loss suffered by B. The indemnitor (A)
may or may not be responsible for the loss suffered by the indemnitee (B).

Indemnity in contract management means an obligations to act on an injured party’s behalf given
the occurrence of a contractually-specified event(s).

Example
An individual or company may own a car and then
decide to purchase different kinds of insurance to
indemnify him for various kinds of losses that arise from
operation of the car, such as damage repairs to his own
car, or medical expenses of others for which he is liable
due to being at fault for an accident.

Question 3

Is an Indemnity an obligation?

Answer 3

Yes

Question 4

What are the advantages and disadvantages of Indemnity?

Answer 4

Additional financial cover for both parties

Support and collaboration of both parties

Question 5

What does subrogation mean?

Answer 5

The substitution of one person in the place of another in relation to a claim. That is, one person (the subrogee) ‘steps into the shoes’ of the other (the subrogor) and is assigned with all their rights and remedies.

Subrogation commonly arises in construction in relation to insurance policies, where the insurer will often need the right to step into the shoes of the insured in order to pursue a claim against a third party with a contractual obligation to the insured.

This allows the insurer to attempt to recover the cost of the compensation they may have paid to the insured.

By assigning their rights and remedies, the insured is prevented from pursuing a claim against the third party themselves, although if the insurer recovers more than the compensation (plus expenses) they will generally pass this back to the insured.

Question 6

What is the difference between subrogation and indemnity?

Answer 6

Indemnity is an obligation between two parties where if one party gains any loss and expenses, the other party steps in to financially aid the other party regarding any loss and expenses. Any example of this could be a non-payment of statutory fees.

It must however been expressed in the contract and the indemnities must be specific to the event.

subrogation is the substitution of a person which gives the subrogee the substitutes RIGHTS AND REMEDIES

Subrogation is commonly used in insurance regarding situations such as to pursue a claim against a third party with a contractual obligation to the insured. This mechanism DOES NOT allow the insured to claim against the third party.

Question 7

What is the difference between a guarantee and indemnity?

Answer 7

A guarantee is the promise of a third party to honour the obligation of a party to a contract should that party be unable or unwilling to do so (usually a guarantee is limited to an obligation to pay a debt – bond in contract).

Question 8

What is the purpose of an insurance in the construction industry?

Answer 8

xx

Question 9

What is the difference between Indemnity and Insurance?

Answer 9

xx

Question 10

Explain the 3 Insurance Types and where are they found in the JCT?

Answer 10

They are found in Schedule 3

Option A applies to new buildings and is an all risks policy to be taken out by the contractor;

Option B also applies to new buildings and is an all risks policy to be taken out by the employer; and

Option C applies to extensions/alterations to existing buildings, and is to be taken out by the employer. The works are to be insured under an all risks policy, whereas the existing buildings are only to be insured
against the specified perils (fire, lightening, explosions, and so on).

Question 11

What if damage occurs but it is not the Contractors fault?

Answer 11

Clause 6.5.1 is concerned with damage to property which is not the fault of the contractor, but is subject to certain exclusions. This insurance is an anomaly for the JCT contracts in that it is to be maintained until the expiry of the defects period.

Question 12

How is the title passed on in JCT and NEC?

Answer 12

JCT
Title is passed on through payment

NEC
Title is passed on whether the material/plant is on the site or are marked as for the works IF off-site

Question 13

Is there a limit to the maximum compensation?

Answer 13

Yes, IF has been expressed

Question 14

Why might the Contractor not be concerned about the retention of title in regards to plant and equipment?

Answer 14

With regards to plant and equipment, the main contractor may not be concerned about title as such, however, it may be necessary in the event of insolvency of a key subcontractor.

JCT
The JCT form recognises this and states that, after a
termination, the contractor may not remove equipment from site until allowed to do so.

NEC
Under the NEC3 he may only remove equipment when it is no longer needed.

Question 15

When can subrogation arise?

Answer 15

Automatically as a matter of law

By agreement as part of a contract

Question 16

What is a risk in the construction industry?

Answer 16

A risk is when an event has/could negatively affect the project in regards to:

Cost
Time
Quality

The Contractor and Employee hold separate risks

Question 17

Where are the risks allocated in the Contract?

Answer 17

Generally, the allocation of risk in NEC3 contract is between the parties and is often dealt with throughout the form in the CONTRACT DATA and the WI

Question 18

What is the purpose of stating the Contractors and Employees risks in NEC?

Answer 18

The purpose of stating employers and contractors
risks is to avoid the problems of interpretation
usually encountered in a more traditional forms.

Question 19

Is insurance different in different contract forms?

Answer 19

The standard forms VARY quite considerably in their
treatment of insurance.

It is ESSENTIAL that the parties understand what their chosen contract requires of them in this context and whether or not additional OR alternative insurance arrangements need to be made.

Question 20

How is insurance treated differently in JCT and NEC?

Answer 20

JCT
There are 3 insurance options which the parties can choose. Option A relates to existing structure whilst Option B,C relate to new structures.

NEC
the parties choose the relevant insurances and who is to procure them, on a project-specific basis.

NEC is less prescriptive in comparison to JCT in regards to insurance. HOWEVER, if the insurance is obtained by the Employer clause 87 MUST apply

Question 21

What is Public Liability Insurance? Is it included in the JCT insurances?

Answer 21

Yes however PLI ONLY covers for events where NEGLIGENCE is involved

Question 22

What is the purpose of Insurance?

Answer 22

JCT 6.2 Insurance is available to ensure that an employer is not left exposed in this way.

Question 23

What is Professional Indemnity Insurance? Who purchase’s it?

Answer 23

PII covers intangibles, such as financial loss due to

1. faulty design,
2. poor advice
3. unintentional copyright infringement.

Professional Indemnity Insurance covers your legal defence fees and the cost of compensation you may owe due to damages

The Contractor purchases Professional Indemnity EVEN if this design work is carried out by a third party such as an engineer.

Question 24

Who is covered by Law to have professional indemnity?

Answer 24

Consultant QS???