TODAY IS PARTICIPATION DAY
• ASK AS MANY QUESTIONS AS YOU WISH, COMMENT
IF YOU HAVE ANOTHER VIEW OR WISH TO MAKE A
CONTRIBUTION
• REMEMBER, THE ONLY SILLY QUESTION OR COMMENT IS
THE ONE NOT VOICED, I TOO WILL ASK QUESTIONS
Never consider your answer to be stupid
and opening a door for others to laugh at
you or criticize you , we are all in the
same position. Your answer is your
understanding of the problem, others may
have different views, equally wrong or
right, your answers give me a lead on how
to proceed so as to give you the best
instruction
• PARTICIPATION IS THE NAME OF THE GAME ALL
VIEWS ARE WELCOME, SO PLEASE VOICE THEM
UNDERWRITING CRITERIA
GENERAL INFORMATION - 1
• NAME OF PROPOSER;
• RELATIONSHIP OF PROPOSER TO PROJECT;
• IS THERE A CONTRACTUAL RESPONSIBILITY TO INCLUDE
THE INTERESTS OF OTHER PARTIES?
• IF SO, NAME THESE PARTIES (SEE NEXT SLIDE);
• LOCATION OF CONTRACT SITE;
• DESCRIBE THE CONTRACT SITE TOPOGRAPHY;
• RESULTS OF ANY GEOTECHNIC AND HYDROLOGY
INVESTIGATIONS CARRIED OUT NAME(S) OF ENGINEERS;
• DESCRIPTION OF PROJECT;
• COPIES OF PLANS, SPECIFICATIONS AND APPLICABLE
CONTRACT DOCUMENT CLAUSES WOULD BE OF PARTICULAR
VALUE TO UNDERWRITER;
• PARTICULARS OF ANY FREE-ISSUE MATERIALS TO BE
PROVIDED TO THE CONTRACTOR AND VALUE THEREOF;
CONSTRUCTION HIERACHY
PRINCIPAL
PROJECT MANAGER
ENGINEERS AND
ARCHITECT
EARTHWORKS
CONTRACTOR
PILING AND SUPPORT
SUB-CONTRACTOR
CIVIL CONTRACTOR
STRUCTURAL
CONTRACTOR
ELECTRICAL &
MECHANICAL
CONTRACTOR
SITE SERVICES
SUB-CONTRACTOR
ROOFING
SUB-CONTRACTOR
LIFTS AND
ELEVATOR
SUB-CONTRACTOR
UNDERWRITING CRITERIA
GENERAL INFORMATION - 2
• IS THE PROJECT A TURNKEY PROJECT OR WILL IT BE
TAKEN OVER IN SECTIONS WHEN COMPLETE;
• WILL THE PROJECT BE GIVEN TO ONE CONTRACTOR OR
WILL IT BE FRAGMENTED IN OTHER WORDS WILL SEPARATE
CONTRACTS BE AWARDED TO CIVIL, STRUCTURAL,
ELECTRICAL AND MECHANICAL CONTRACTORS;
• WILL SITE PREPARATION INVOLVE BUILDINGS DEMOLITION
• IF SO, PROVIDE PARTICULARS OF WORK ENTAILED, WITH
PARTICULAR REFERENCE TO BUILDINGS AND POTENTIALLY
HAZARDOUS SUBSTANCES THAT MAY HAVE BEEN STORED;
• THE OVERALL CONTRACT PERIOD FROM………TO………;
• A BAR CHART SHOWING VARIOUS ACTIVITIES WOULD BE
BENEFICIAL TO PREMIUM COMPUTATION;
• THE FULL CONTRACT VALUE INCLUDING FREE-ISSUE
MATERIALS;
• THE VALUE OF EACH ENGINEERING DISCIPLINE;
• THE SECURITY PRECAUTIONS TO BE UNDERTAKEN TO
PREVENT THEFT, MALICIOUS DAMAGE ETC.;
UNDERWRITING CRITERIA
CIVIL WORKS – 1
• THE VALUE OF CIVIL WORKS;
• ANY SPECIAL PRECAUTIONS TO BE TAKEN IN VIEW OF
GEOTECHNIC OR HYDROLOGY FINDINGS;
• DESCRIBE THE FOUNDATIONS ESPECIALLY WHETHER THEY
INCLUDE PILES AND THEIR TYPE STRIP, RAFT ETC.;
• IS THE POLICY TO PROVIDE FOR PILING, IF SO TYPE OF
PILES ENVISAGED AND EXPECTED DEPTH OF PILES;
• NAME OF PILING CONTRACTOR;
• PROVIDE THE DEPTH OF EXCAVATIONS;
• TO WHAT EXTENT WILL THERE BE REMOVAL OF SUPPORT
(LATERAL AND/OR OTHERWISE) TO ADJACENT PROPERTY OR
BUILDINGS;
• IF TEMPORARY AND PERMANENT SUPPORT TO BE INSTALLED
WHO WILL UNDERTAKE THIS WORK;
• NAME THE SUPPORT CONTRACTOR;
• WILL THERE BE ANY ON-SITE MANUFACTURE OR CASTING
OF PRESTRESSED COMPONENTS;
UNDERWRITING CRITERIA
CIVIL WORKS – 2
• PROXIMITY OF SITE TO SEA OR INLAND WATERWAYS;
• IF A RIVER OR DAM PROVIDE THE 50 YEAR FLOOD
HISTORY, IS THERE A POSSIBILITY OF THE SITE BEING
FLOODED FROM THIS WATER SOURCE;
• DESCRIBE THE PRECAUTIONS TO PREVENT FLOODING;
• DEPENDING ON HYDROLOGY REPORT, WHAT PRECAUTIONS
ARE TO BE TAKEN TO HANDLE THE INGRESS OF WATER,
FROM AN UNDERGROUND SOURCE;
• ALSO, GIVE DETAILS OF STANDBY PUMPING
ARRANGEMENTS;
UNDERWRITING CRITERIA
CIVIL WORKS – 3
• IF THE CIVIL WORKS COMPRISES SHAFT SINKING
TUNNELLING OR OTHER UNDERGROUND WORK THEN
DESCRIBE:
– THE DIAMETER OF THE SHAFT OR TUNNELL,
– THE PROPOSED DEPTH OF THE SHAFT OR LENGTH OF THE
TUNNELL AND WHETHER THE SHAFT OR TUNNELL WILL BE
LINED,
– THE PRE-EXCAVATION GROUND INTEGRITY INVESTIGATIONS, A
COPY OF THE REPORT WOULD BE NECESSARY PLUS THE
ENGINEER’S RECOMMENDATIONS,
– PARTICULARS OF THE METHOD OF PROBING AHEAD OF THE
WORKING FACE DURING EXCAVATION IS A MUST;
• FOR ANY RAISEBORING OR TUNNELL BORING WORK THE
DIAMETER OF THE RAISEBORE HEAD OR TUNNELL BORING
HEAD MUST BE GIVEN PLUS DETAILS AS REQUIRED IN THE
SECOND THIRD AND FOURTH PARAMETER ABOVE.
PROBING AHEAD OF THE WORKING
FACE
• THIS TYPE OF RADIAL DRILLING AHEAD OF THE WORKING
FACE IS TO IDENTIFY THE NATURE OF THE GROUND
CONDITIONS AND THE PRESENCE OF WATER
• TO BE EXPECTED AS THE TUNNEL OR SHAFT CONTINUES
•
SIDE ELEVATION
END ELEVATION
DRILLING OUTWARDS 30 TO 45 DEGREES FROM THE STRAIGHT LINE
UNDERWRITING CRITERIA
STRUCTURAL WORKS
• THE STRUCTURE TO BE DESCRIBED FULLY GIVING :
– THE TYPE OF THE STRUCTURE IE. FACTORY, WAREHOUSE,
OFFICE BLOCK, HOSPITAL OR TENEMENT BUILDING ETC.,
– THE NATURE OF THE STRUCTURE WHETHER IT IS OF
CONCRETE, WITH BRICK INFILLS OR A BASIC STEEL
STRUCTURE WITH CONCRETE LANDINGS WITH BRICK INFILL
ETC.,
– THE NUMBER OF BASEMENTS,
– DETAILS OF ANY PROTOTYPE OR UNTRIED FEATURES EMBODIED
IN THE DESIGN OF THE STRUCTURE, WHETHER STRUCTURAL OR
CONSTRUCTION METHOD. IS THE SELECTED CONTRACTOR
FAMILIAR WITH THIS METHODOGY,
– THE NUMBER OF FLOORS,
– THE TYPE OF FINISHES,
– DETAILS WHEN ELECTRICALS AND MECHANICALS WILL BE
INSTALLED;
• DESCRIBE THE MEASURES TO PREVENT THE STRUCTURE
FROM FLOODING AND WHAT PUMPING ARRANGEMENTS WILL
BE PRESENT TO HANDLE THE INGRESS OF WATER.
UNDERWRITING CRITERIA
ELECTRICAL & MECHANICAL WORKS
• DESCRIBE THE ELECTRICALS AND MECHANICALS TO BE
INCORPORATED INTO THE WORKS IE BOILERS, POWER SUPPLY
TRANSFORMERS AND SWITCHGEAR, AIR CONDITIONING AND/OR
MANUFACTURING MACHINERY EG TO MANUFACTURE WIDGETS;
• WHETHER THERE ARE ANY UNTRIED FEATURES OR PROTOTYPES OR
WHETHER THE MACHINERY IS STANDARD OF THE SAME TYPE AND
SIZE CURRENTLY OPERATING IN MANY FACTORIES;
• GIVE PARTICULARS OF THE INSTALLATION PROCESS AND TESTING
METHODS;
• WILL PARTS OF THE MACHINERY BE TAKEN INTO OPERATION
BEFORE THE PLANT AS A WHOLE IS COMMISSIONED, IN OTHER
WORDS WILL THERE BE BENEFICIAL USE BEFORE TAKE-OVER, IF
SO, MUST INSURANCE CONTINUE AFTER BEING TAKEN INTO USE?
IS COVER TO INCLUDE ELECTRICAL AND MECHANICAL BREAKDOWN?
• IS THE FEEDSTOCK INFLAMABLE OR IS THERE AN EXPLOSION
HAZARD
• DESCRIBE THE TESTING PROCEDURE PARTICULARLY THE RUNNING
TEST AND SAFETY PRECAUTIONS DURING TESTING
WHAT DETERMINES A PROTOTYPE
OR UNTRIED FEATURE
• The cylinder on the left is the standard cylinder
that has been manufactured for many years and has
stood the test of time. All that has been done to
manufacture the cylinder on the right is to
increase size, otherwise, everything else is the
same, thus it is a prototype with untried
features. Accordingly, the stresses and strains
will be multiples of the original.
• In other words a failure waiting
to happen.
UNDERWRITING CRITERIA
MAINTENANCE PERIOD
• GIVE DETAILS OF THE MAINTENANCE REQUIREMENTS OF
THE CONTRACT, DOES THE CONTRACT CALL FOR
• MAINTENANCE VISITS ONLY,
• LIMITED MAINTENANCE PROVIDING FOR DAMAGE
CONSEQUENT ON PRIOR DEFECTS OF MATERIALS,
WORKMANSHIP, DESIGN PLAN OR SPECIFICATION
OCCURRING DURING CONSTRUCTION AT THE CONTRACT
SITE,
• WIDER FORM OF MAINTENANCE ALLOWING FOR DAMAGE
RESULTING FROM ALL PRIOR DEFECTS OF MATERIALS,
WORKMANSHIP, DESIGN PLAN OR SPECIFICATION;
• DOES THE CONTRACT ALLOW FOR SUBROGATION RIGHTS IN
THE EVENT OF DEFECTIVE MATERIALS, DESIGN, PLAN OR
SPECIFICATION OR OFF-SITE WORKMANSHIP.
GENERAL CONSIDERATIONS
THIRD PARTY LIABILITY - 1
• LIMIT OF INDEMNITY (INCLUSIVE OR EXCLUSIVE OF
EXTENSIONS – R00,000,000;
• PROPERTY DAMAGE EXCESS
• RISK LOCATION RELATIVE TO:
– ADJACENT PROPERTIES
– EXISTING PUBLIC SERVICES OF WATER, SEWERAGE,
ELECTRICITY OVERHEAD LINES OR UNDERGROUND CABLES
– EXISTING PROPERTY ADJACENT TO CONTRACT WORKS SITE
• IS THERE TO BE ANY BLASTING, IF SO, GIVE DETAILS
• DEPTH OF EXCAVATION
• WILL THE EXCAVATION AFFECT THE SUPPORT OF ADJACENT
THIRD PARTY BUILDINGS
• EXPERTISE OF DESIGN ENGINEER AND CONTRACTOR
• ARE THE WORKING METHODS STANDARD AND WILL THERE BE
ANY METHODS OF WORK UNFAMILIAR TO THE CONTRACTOR
GENERAL CONSIDERATIONS
PUBLIC LIABILITY - 2
• ONE MUST THEN CONSIDER THE NECESSITY TO INCLUDE
ANY OR ALL OF THE FOLLOWING EXTENSIONS OF COVER:
–
–
–
–
–
ARREST, ASSAULT, DISCHARGE AND DEFAMATION
EMERGENCY MEDICAL EXPENSES
PREVENTION OF ACCESS
LEGAL DEFENCE COSTS
TRESSPASS OR NUISANCE;
• REMOVAL OF SUPPORT (LATERAL OR VERTICAL) COULD BE
AN EXTENSION, HOWEVER THE TERMS OF THIS COVER
DIFFERS CONSIDERABLY FROM THE BASIC COVER, THUS IT
IS DESIREABLE TO ISSUE A SEPARATE SECTION OR
POLICY. THIS COVER WILL BE DISCUSSED SEPERATELY.
PREMIUM COMPUTATION
CONTRACT WORKS – GENERAL - 1
• UNDERWRITING IS A SCIENCE AND NOT
MERELY A RULE OF THUMB;
• THE UNDERWRITER WHO RELIES ON GUESSWORK
MAY BE LUCKY FOR A PERIOD BUT WILL SOON
COME SHORT;
• ONE CANNOT ASSUME THAT A SINGLE RATE WOULD APPLY TO ALL
AND ANY PROJECT, NO MATTER HOW SLIGHT, THERE ARE ALWAYS
DIFFERENCES WHICH COULD MAKE A VAST DIFFERENCE TO THE
RATE CHARGED;
• ACCORDINGLY EACH RISK MUST BE UNDERWRITTEN ON ITS OWN
MERITS AND PECULIARITIES WITH EACH ASPECT BEING GIVEN
INDIVIDUAL CONSIDERATION;
• WE THEN CALCULATE INDIVIDUAL RATES FOR THE CIVIL,
STRUCTURAL,ELECTRICAL & MECHANICAL AND LIABILITY RISKS;
• NO, I AM NOT GOING TO GIVE YOU BASIS RATES, BUT I WILL
SUGGEST METHODS OF CALCULATION. THE BASIS RATES ARE FOR
EACH UNDERWRITING HOUSE TO DETERMINE THEMSELVES.
PREMIUM COMPUTATION
CONTRACT WORKS – GENERAL - 2
• IT MUST BE APPRECIATED THAT PERILS OF THE
ENVIRONMENT HAVE A DIFFERENT IMPACT ON EACH OF THE
CONSTRUCTION DISCIPLINES;
• FOR EXAMPLE, EXCESSIVE RAINFALL MAY NOT BE AS
CRITICAL TO A PARTLY CONSTRUCTED STRUCTURE AS IT
WOULD TO FOUNDATION EXCAVATIONS, ON THE OTHER HAND
WIND MAY NOT CAUSE MUCH DAMAGE TO AN EXCAVATION AS
IT WOULD TO A STRUCTURE NOT ENTIRELY BRACED OR
STEEL BEING LIFTED INTO POSITION A FURTHER PROBLEM
WOULD BE WHEN A STRUCTURE IS NOT FULLY CLAD THUS
CAUSING A WIND TUNNELL WITHOUT ANY EXIT;
• FIRE IS A HAZARD MORE SERIOUS WHERE THE BUILDING
IS NEARING COMPLETION OR WHERE MACHINERY HAS BEEN
INSTALLED OFTEN PACKING MATERIALS ARE NOT REMOVED
FROM SITE. FIRE IS NOT THAT SERIOUS WHEN RELATED
TO EXCAVATIONS OR FOUNDATIONS ONE COULD EXPECT
MINIMAL DAMAGE;
PREMIUM COMPUTATION
CONTRACT WORKS – CIVIL WORKS 1
• It is usual for there to be a specific rate % for each
project type e.g.. ROADS, RAILWAY SYSTEMS, DAMS, SHAFT
SINKING, AIRPORT RUNWAYS/APRONS, TUNNELLING AND THE
LIKE;
• THE APPLICABLE RATE X (SAY 2.5%) MUST THEN BE
APPORTIONED TO RISK CATEGORIES, FOR EXAMPLE, (THESE %
ARE JUST AN ILLUSTRATION AND ARE NOT REALISTIC)
STORM/WIND 45% FIRE/LIGHTNING/EXPLOSION 5%
COLLAPSE/LANDSLIDE 40% THEFT/MALICIOUS DAMAGE 10%;
• NEXT ONE MUST DECIDE ON THE EXTENT OF THE RISK
APPLICABLE TO EACH CATEGORY, THUS STORM AND WIND ARE 45%
OF 2.5%= 1.125% BUT THE WORK IS BEING UNDERTAKEN DURING
THE DRY SEASON THEREFORE THIS RISK IS REGARDED AS
MINIMAL SAY 25% OF THE NORM, OUR RATE FOR THIS PORTION
IS THUS 25% 1.125% = 0.281%;
• THE SAME CALCULATION IS CARRIED OUT FOR EACH OF THE
OTHER CATEGORIES OF THE RATE X;
PREMIUM COMPUTATION
CONTRACT WORKS – CIVIL WORKS 2
• THE NEXT PART OF THE CALCULATION IS TO TAKE INTO
ACCOUNT THE PERIOD ON RISK, THIS MAY NOT ONLY BE
THE CONSTRUCTION PERIOD, BUT THE RISK MAY CONTINUE
UNTIL TAKE-OVER OF THE COMPLETED PROJECT AS IN THE
CASE OF A TURNKEY PROJECT;
• IT MUST BE REMEMBERED THAT IF TAKE-OVER IS TO BE
DELAYED UNTIL FINAL COMPLETION, THEN THE CIVIL
RISK WILL BE EXPOSED FOR A PERIOD THAT MUST BE
DETERMINED (DURING CONSTRUCTION AND THEREAFTER
UNTIL TAKEOVER);
• FINALLY THERE MUST BE A CHARGE FOR THE MAINTENANCE
PERIOD DEPENDING ON THE NATURE OF MAINTENANCE
COVER REQUIRED IN TERMS OF THE CONTRACT;
• THE CUMULATIVE RATE IS THEN APPLIED TO THE CIVIL
PORTION OF THE CONTRACT VALUE TO PRODUCE A
PREMIUM.
PREMIUM COMPUTATION
CONTRACT WORKS – STRUCTURAL WORKS 1
• There is a specific rate % for each project type e.g..
RESIDENTIAL BUILDINGS, OFFICE BLOCKS, HOTELS, HOSPITALS,
SHOPPING MALLS, BRIDGES, FACTORY PREMISES, WATER TOWERS
CHIMNEYS AND THE LIKE;
• THE APPLICABLE RATE X (SAY 1%) MUST THEN BE APPORTIONED
TO RISK CATEGORIES, FOR EXAMPLE, (THESE % ARE JUST AN
ILLUSTRATION AND ARE NOT REALISTIC) STORM/WIND 20%
FIRE/LIGHTNING/EXPLOSION 30% COLLAPSE/LANDSLIDE 35%
THEFT/MALICIOUS DAMAGE 15%;
• NEXT ONE MUST ONE MUST DECIDE ON THE EXTENT OF THE RISK
APPLICABLE TO EACH CATEGORY, THUS FIRE ETC. ARE 30% OF
X(X BEING SAY 1%) (30%X)= 0.3% BUT THE WORK IS BEING
UNDERTAKEN OUT OF THE LIGHTNING SEASON AND ALL PACKING
MATERIALS ARE REMOVED FROM THE BUILDING THEREFORE THIS
RISK IS REGARDED AS MINIMAL SAY 20% OF THE NORM, OUR
RATE FOR THIS PORTION IS THUS 20% OF 0.3% =0.06%;
• THE SAME CALCULATION IS CARRIED OUT FOR EACH OF THE
OTHER CATEGORIES OF THE RATE X;
PREMIUM COMPUTATION
CONTRACT WORKS – STRUCTURAL WORKS 2
• THE NEXT PART OF THE CALCULATION IS TO TAKE INTO
ACCOUNT THE PERIOD ON RISK, THIS MAY NOT ONLY BE
THE CONSTRUCTION PERIOD, BUT THE RISK MAY CONTINUE
UNTIL TAKE-OVER OF THE COMPLETED PROJECT AS IN THE
CASE OF A TURNKEY PROJECT;
• IT MUST BE REMEMBERED THAT IF TAKE-OVER IS TO BE
DELAYED UNTIL FINAL COMPLETION, THEN THE
STRUCTURAL RISK WILL BE AT RISK FOR AN EXTENDED
PERIOD WHICH MUST BE DETERMINED ESPECIALLY IF
MACHINERY IS TO BE INSTALLED BEFORE TAKE-OVER OF
THE COMPLETED STRUCTURE THUS AN ADDITIONAL CHARGE
FOR THE EXTENDED PERIOD AFTER CONSTRUCTION IS
WARRANTED;
• FINALLY THERE MUST BE A CHARGE FOR THE MAINTENANCE
PERIOD DEPENDING ON THE NATURE OF MAINTENANCE
COVER REQUIRED IN TERMS OF THE CONTRACT;
• THE CUMULATIVE RATE IS THEN APPLIED TO THE
STRUCTURAL PORTION OF THE CONTRACT VALUE TO
PRODUCE A PREMIUM.
PREMIUM COMPUTATION
CONTRACT WORKS – ELECTRICAL &
MECHANICAL WORKS - 1
• UNLIKE CIVIL AND STRUCTURAL RATING, THE ELECTRICAL
AND MECHANICAL RATE IS BUILT UP OVER A NUMBER OF
FACTORS, THESE ARE:
–
–
–
–
–
–
–
HANDLING AND STATIC TESTING
TESTING AND RUNNING
FIRE AND SPECIAL PERILS DURING CONSTRUCTION
FIRE AND SPECIAL PERILS DURING TESTING
ENVIRONMENT
BENEFICIAL USE IF REQUIRED IN TERMS OF CONTRACT
MAINTENANCE ONCE AGAIN BASED ON THE REQUIRED COVER;
• EACH OF THESE RATE COMPONENTS HAS ITS OWN SPECIFIC
RATE WHICH EXCEPT FOR THE HANDLING AND STATIC
TESTING RATE ARE ADJUSTED TO TAKE IN TO ACCOUNT
THE PARTICULAR PERIOD OF COVER AND RISK FACTOR.
EACH OF THESE RATE COMPONENTS ARE EXPLAINED AS
FOLLOWS:
PREMIUM COMPUTATION
CONTRACT WORKS – ELECTRICAL &
MECHANICAL WORKS - 2
• HANDLING AND STATIC TESTING: THIS RATE COMPONENT
ALLOWS FOR PRE ERECTION STORAGE ON SITE, MOVEMENT
FROM STORAGE TO POINT OF ERECTION, HOISTING ONTO
FOUNDATIONS, ASSEMBLY THEN NON ENERGISED TESTING
• TESTING AND RUNNING: IT IS AT THIS STAGE THAT
POWER IS FIRST APPLIED TO THE MACHINE AND
FEEDSTOCK INTRODUCED. EFFECTIVELY THIS COVER
EQUATES TO MACHINERY BREAKDOWN COVER. THE PERIOD
IS USUALLY RESTRICTED TO 30 DAYS ON WHICH THE
MACHINERY IS OPERATED FOR TESTING PURPOSES. IT IS
ASSUMED THAT ALL MANUFACTURERS SAFETY REQUIREMENTS
AND COMMISSIONING PROCEDURES WILL BE ADHERED TO
AND THAT SAFETY DEVICES WILL NOT BE OVERRIDDEN OR
NULLIFIED. IT IS USUAL THAT WHERE THERE ARE ANY
UNTRIED FEATURES OR PROTOTYPES THAT TESTING COVER
WILL BE EXCLUDED;
• TESTING COVER IS USUALLY ONLY GIVEN ON NEW
MACHINERY;
PREMIUM COMPUTATION
CONTRACT WORKS – ELECTRICAL &
MECHANICAL WORKS - 3
• FIRE AND SPECIAL PERILS: THESE RISKS ARE NO
DIFFERENT TO THOSE GIVEN UNDER A FIRE OR ASSETS
POLICY, ACCORDINGLY, THE RATE SHOULD BE SIMILAR TO
THE STANDARD FIRE POLICY. THIS COMPONENT IS
DIVIDED INTO TWO CATEGORIES, NAMELY DURING
CONSTRUCTION AND THEN DURING TESTING AND RUNNING.
A LESSER RATE SHOULD BE APPLIED TO THE
CONSTRUCTION PERIOD POSSIBLY 50% OF FIRE & PERILS
RATE, WHEREAS THE FULL RATE SHOULD BE APPLIED TO
THE TESTING PERIOD. IN BOTH INSTANCES THE RATE
SHOULD BE ADJUSTED FOR THE PERIOD OF COVER;
• ENVIRONMENT: THIS COMPONENT TAKES INTO
CONSIDERATION THE RISKS OF THEFT, MALICIOUS DAMAGE
GEOTECHNIC AND HYDROLOGY RISKS AND A VARIETY OF
OTHER MINOR PERILS.
UNDERWRITING CRITERIA
PUBLIC LIABILITY - 1
• THIS SECTION OF THE POLICY PROVIDES FOR LIABILITY TO
THIRD PARTIES IN RESPECT OF LOSS OF OR DAMAGE TO
PROPERTY OR PERSONAL INJURIES OR DEATH OF PERSONS NOT
BEING EMPLOYEES OR THE FAMILY OF THE INSURED PARTY;
• WE ARE NOT TALKING ABOUT A SEPARATE POLICY, BUT AS A
SECTION TO A CONSTRUCTION POLICY, THUS ANY LIABILITY
INCURRED SHOULD ORIGINATE AT THE CONTRACT SITE IN
CONNECTION WITH SITE ACTIVITIES DURING THE PERIOD OF
INSURANCE;
• TO PROVIDE FOR ANY WIDER COVER A GENERAL LIABILITY
POLICY SHOULD BE TAKEN OUT IN THE ACCIDENT DEPARTMENT;
• THERE ARE TWO BASES OF COMPUTING PUBLIC LIABILITY
PREMIUMS EITHER ON:
– LIMIT OF LIABILITY,
– OR CONTRACT VALUE;
• NEITHER BASIS CAN BE CONSIDERED SUPERIOR TO THE OTHER,
EFFECTIVELY THE PREMIUM SHOULD BE THE SAME;
UNDERWRITING CRITERIA
PUBLIC LIABILITY - 2
• RECOGNISING THAT THERE ARE TWO ACCEPTABLE BASES,
WHAT FACTORS SHOULD BE TAKEN INTO CONSIDERATION IN
COMPUTING THE PREMIUM;
• ALL THOSE LISTED HEREUNDER WILL EITHER BE
PROMINENT IN THE PREMIUM CALCULATION OR OF LITTLE
OR NO EFFECT, EACH MUST BE CONSIDERED ON MERITS:
– IS THE SITE A GREEN FIELDS OR BROWN FIELDS SITE, IS
THERE A POSSIBILITY OF DAMAGE TO EXISTING PROPERTY
EITHER ON-SITE OR ON SITES ADJACENT TO THE CONTRACT
SITE,
– IS THE RISK LOCATION IN/OUT OF TOWN – ARE THERE ANY
PUBLIC SERVICES IN THE VICINITY,
– ARE ANY EXPLOSIVES TO BE USED,
– DEPTH OF EXCAVATION/ GEOTECHNIC RISKS,
– EXPERTISE AND TRACK RECORD OF CONTRACTOR AND DESIGN
ENGINEER,
– WORKING METHODS AND DESIGN, PLAN OR SPECIFICATION,
– RISK MANAGEMENT;
– THE POTENTIAL RISK OF SPREAD OF FIRE TO ADJACENT
PROPERTIES EITHER ON SITE OR IN THE PROXIMITY THERETO
UNDERWRITING CRITERIA
THIRD PARTY LIABILITY - 3
• EXTENSIONS OF COVER
• ARE THE SELECTED EXTENSIONS OF COVER TO BE WITHIN
THE OVERALL LIMIT OF INDEMNITY OR ARE THEY TO HAVE
SEPARATE LIMITS OF INDEMNITY? IF SO, PLEASE
PROVIDE THE REQUIRED LIMITS
•
•
•
•
•
•
•
EXTENSION OF COVER
ARREST,ASSAULT, DISCHARGE
OR DEFAMATION
EMERGENCY MEDICAL EXPENSES
PREVENTION OF ACCESS
LEGAL DEFENCE COSTS
TRESSPASS OR NUISANCE
LIMIT OF INDEMNITY
R00,000,000
R
000,000
R 0,000,000
R 0,000,000
R00,000,000
PREMIUM COMPUTATION
PUBLIC (THIRD PARTY) LIABILITY - 1
• THE CALCULATION BEGINS WITH A BASIC RATE % WHICH
IS A FUNCTION OF THE LIMIT OF INDEMNITY WHICH
ENVISAGES A 12 MONTH CONTRACT PERIOD, THE BASIC
RATE DIFFERS ACCORDING TO WHETHER IT IS TO BE
APPLIED TO THE CONTRACT VALUE OR THE LIMIT OF
INDEMNITY;
• THE FIRST ADJUSTMENT TAKES INTO CONSIDERATION THE
PERIOD OF THE CONTRACT BY ADJUSTMENT UPWARDS OR
DOWNWARDS FOR LONGER OR SHORTER PERIODS FROM TAKEOVER OF SITE UNTIL FINAL HANDOVER OF THE PROJECT;
• THE NEXT ADJUSTMENTS TAKE INTO CONSIDERATION THOSE
PREVIOUSLY MENTIONED WHICH ARE AS FOLLOWS:
PREMIUM COMPUTATION
PUBLIC (THIRD PARTY) LIABILITY - 2
– IS THE SITE GREEN FIELDS OR BROWN FIELDS IS
THERE A POSSIBILITY OF DAMAGE TO EXISTING
PROPERTY EITHER ON-SITE OR ON SITES ADJACENT TO
THE CONTRACT SITE;
– IS THE RISK LOCATION IN/OUT OF TOWN – ARE THERE
ANY PUBLIC SERVICES IN THE VICINITY;
– ARE ANY EXPLOSIVES TO BE USED;
– DEPTH OF EXCAVATION/ GEOTECHNIC RISKS;
– EXPERTISE AND TRACK RECORD OF CONTRACTOR AND
DESIGN ENGINEER;
– WORKING METHODS AND DESIGN, PLAN &
SPECIFICATION;
– RISK MANAGEMENT;
• FINALLY THE EXTENSIONS MUST BE ADDRESSED:
PREMIUM COMPUTATION
PUBLIC (THIRD PARTY) LIABILITY - 3
–
–
–
–
–
ARREST, ASSAULT, DISCHARGE AND DEFAMATION,
EMERGENCY MEDICAL EXPENSES,
PREVENTION OF ACCESS,
LEGAL DEFENCE COSTS,
TRESSPASS OR NUISANCE.
• THE COMPUTATION OF THE REMOVAL OF SUPPORT RISK IS
UNDERTAKEN ON MUCH THE SAME BASIS, BUT THE BASIC
RATE IS MUCH HIGHER THAN FOR STANDARD LIABILITIES;
• WE HAVE NOT MENTIONED THE RISKS APPLICABLE TO
IMPLOSION OF BUILDINGS BEFORE NOW, HOWEVER, THESE
ARE MUCH MORE ONEROUS THAN ORDINARY LIABILITIES OR
REMOVAL OF SUPPORT LIABILITIES, BUT WE DO NOT
BELIEVE THESE RISKS TO BE APPROPRIATE TO THIS
DISCUSSION.
PREPARING A QUOTATION
• IT IS IMPORTANT FOR THE UNDERWRITER TO BE AWARE OF
HOW THE QUOTATION IS PRESENTED, YOU LIVE BY YOUR
WRITTEN WORD, OR LACK THEREOF;
• CLEARLY, IF THE INTERMEDIARY HAS ASKED FOR A
CERTAIN EXTENSION AND THIS ASPECT HAS NEITHER
NEGATIVELY NOR POSITIVELY BEEN ADDRESSED, IT CAN
BE ARGUED THAT THE REQUEST HAS BEEN ACCEPTED;
• THE FOLLOWING SUGGESTED QUOTATION WORDING MAY
ASSIST IN EXPRESSING CLEARLY THE INTENTION;
• AS AN INTERMEDIARY YOU TOO SHOULD DEFINE CLEARLY
THE NATURE AND EXTENT OF COVER YOU ARE REQUESTING,
THE ONUS IS THEN ON THE UNDERWRITER TO ACCEPT OR
REJECT YOUR REQUEST BY WRITTEN COMMENT IN THE
QUOTQTION PRESENTED.
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 1
• XYZ INSURANCE COMPANY LIMITED (THE INSURER)
• 25 SUMMER PLACE, GLORIOUS COVE
• INSURER’S CONTACT PERSON:
• TELEPHONE NUMBER:
E-MAIL ADDRESS
• DATE OF QUOTATION:
JOHN DOE
011 398 0000
DOEJ@XYZINS.CO.ZA
1ST JULY, 2010
• CLIENT:
ABC MANUFACTURING LIMITED
• INTERMEDIARY:
SMITH AND JONES BROKERS - R SMITH
• INSURED PROJECT: NEW ELECTRIC MOTOR MANUFACTURING
FACILITY FOR ABC MANUFACTURING
• PROJECT VALUE:
R25,500,000
»
»
»
»
CIVIL WORKS R5,000,000
STRUCTURAL WORKS R7,500,000
ELECTRICAL/MECHANICAL WORKS R10,240,000
PRELIMINARY & GENERAL R2,760,000
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 2
• POLICY WORDING:
– XYZ INSURANCE COMPANY LIMITED CONTRACT WORKS WORDING
OR ANY OTHER WORDING AS MAY BE AGREED BY THE COMPANY
(XYZ INS CO LTD) (THE INTERMEDIARY MAY HAVE SUBMITTED
A POLICY WORDING AS PART OF HIS QUOTATION REQUEST,
YOU MUST COMMENT THEREON AS TO ITS ACCEPTABILITY OR
OTHERWISE AND REFER TO AN ACCEPTABLE WORDING)
• THE INSURED PARTIES:
– THE PRINCIPAL:
• ABC MANUFACTURING LIMITED
– THE SITE CONTRACTOR:
• MLM CONTRACTORS (PTY) LIMITED
– SUB-CONTRACTORS:
• EMPLOYED ON THE CONTRACT SITE (EMPLOYED BY THE
CONTRACTOR(S) OR NOMINATED BY THE PRINCIPAL) BUT ONLY TO
THE EXTENT OF LOSS, DAMAGE OR LIABILITY ORIGINATING AT
THE CONTRACT SITE ARISING OUT OF THEIR SITE INVOLVEMENT
EXCLUDING ANY PROFESSIONAL ACTIVITY OR OFF-SITE
MANUFACTURING OR MANUFACTURING GUARANTEES
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 3
• THE INSURED PARTIES (CONTINUED):
– ANY OTHER NAMED PARTY PROPOSED TO AND ACCEPTED BY THE
INSURER SUCH AS PROJECT MANAGERS, MANUFACTURERS,
SUPPLIERS OR PROFESSIONALS BUT ONLY TO THE EXTENT OF
LOSS, DAMAGE OR LIABILITY ORIGINATING AT THE CONTRACT
SITE, EXCLUDING ANY PROFESSIONAL ACTIVITY OFF-SITE
MANUFACTURING PROCESS OR MANUFACTURERS GUARANTEES;
• BASIS OF INDEMNIFICATION:
– CONTRACT WORKS
• THE INSURED PROPERTY
• EXPEDITING COSTS
–
–
–
–
–
LIMIT OF INDEMNITY
R25,500,000
50% OF AGREED CLAIM EXCEEDING R100,000 OR
WHERE LOSS DOES NOT EXCEED R100,000
ESCALATION
DURING CONTRACT PERIOD
15%
DURING PERIOD OF DAMAGE REINSTATEMENT 15%
50,000
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 4
– CURRENCY FLUCTUATION
– DEMOLITION AND DEBRIS REMOVAL
• ASSOCIATED WITH DAMAGE TO WORKS
• WITHOUT DAMAGE TO THE WORKS
–
–
–
–
–
–
–
–
PROFESSIONAL FEES
FIRE BRIGADE CHARGES
PUBLIC AUTHORITIES CHARGES
PUBLIC AUTHORITIES REINSTATEMENT
OFF-SITE STORAGE NOT AT MNFRS.
WORK AWAY
REMOVAL TO A PLACE OF SAFETY
RECORDS AND PLANS
• CLAIMS PREPARATION COSTS
20%
R00,000,000
R00,000,000
R
R
R
R
R
R
R
R
0,000,000
0,000,000
0,000,000
0,000,000
0,000,000
0,000,000
0,000,000
0,000,000
R 0,000,000
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 5
– THIRD PARTY LIABILITY
– LIMIT OF INDEMNITY
R00,000,000
• INCLUDED IN LIMIT OF INDEMNITY
– LEGAL DEFENCE COSTS
R 0,000,000
– EMERGENCY MEDICAL EXPENSES
R
000,000
– TRESSPASS OR NUISANCE
R 0,000,000
– ARREST ASSAULT DISCHARGE
DEFAMATION
R
000,000
WHERE A ZERO HAS BEEN PLACED OPPOSITE AN ITEM THIS
MEANS THAT NO COVER IS TO BE GIVEN FOR THAT ITEM.
NOTE TO UNDERWRITER
THE LIMITS FOR THE EXTENSIONS SHOWN ABOVE ARE NOT
NECESSARILY SUB LIMITS INCLUDED IN THE OVERALL LIMIT OF
INDEMNITY. IF UNDERWRITTEN AS ADDITIONAL LIMITS THE
WORDS “INCLUDED IN LIMIT OF INDEMNITY” SHOULD BE OMITTED
AND THE WORDS “ADDITIONAL TO LIMIT OF INDEMNITY” ADDED
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 6
• THE PROPERTY INSURED:
– THE PERMANENT WORKS BEING ALL WORKS AND PROPERTY AS
DESCRIBED IN THE CONTRACT DOCUMENTS AS THE CONTRACT
WORKS AND ANY TEMPORARY WORKS CREATED OR INSTALLED IN
ORDER TO CONSTRUCT THE PERMANENT WORKS;
• PERIOD OF COVER:
– COVER COMMENCES WITH THE HANDING OVER OF THE CONTRACT
SITE TO THE CONTRACTOR, OR THE DELIVERY OF MATERIALS
AND OTHER THINGS FOR INCORPORATION INTO THE PROJECT;
DURING ANY PERIOD OF STORAGE ON OR ABOUT THE CONTRACT
SITE AWAITING INCORPORATION, CONSTRUCTION OR ERECTION
– DURING ANY PERIOD OF OFF-SITE STORAGE AT ANY SITE
AGREED BY THE INSURER WHICH SHALL NOT INCLUDE
SUPPLIERS OR MANUFACTURERS PREMISES,
– WHILST BEING CONSTRUCTED, ERECTED OR INSTALLED,
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 7
• PERIOD OF COVER: PERIOD OF COVER (CONTINUED):
– DURING ANY PERIOD OF CONTRACTUAL BENEFICIAL OCCUPATION OF
ANY COMPLETED OR PARTIALLY COMPLETED WORKS DECLARED TO AND
ACCEPTED (IN WRITING) BY THE INSURER NOT EXCEEDING
MONTHS
DURING ANY CONTRACTUAL MAINTENANCE PERIOD COVERING
DAMAGE:
OCCURRING DURING CONTRACTUAL VISITS BY THE CONTRACTOR OR
MANUFACTURER FOR THE PURPOSE OF CALIBRATION ADJUSTMENT OR
MAKING GOOD DEFECTS OR DAMAGE DUE TO CONSTRUCTION OR
ERECTION OR MAKING GOOD ANY DAMAGE DONE DURING SUCH
CONTRACTUAL VISITS
DAMAGE DUE TO PRIOR DEFECTS OR DEFECTIVE CONDITIONS BUT
EXCLUDING THE DEFECTIVE CONDITION ITSELF, WHICH SHOULD
FORM THE SUBJECT OF A MANUFACTURER’S GUARANTEE OR
PROFESSIONAL INDEMNITY;
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 8
• THE DEDUCTIBLES:
• IN RESPECT OF EACH AND EVERY CLAIM ARISING OUT OF
OR IN CONNECTION WITH ANY ONE EVENT OR OCCURRENCE
OR SERIES OF OCCURRENCES ARISING OUT OF OR IN
CONNECTION WITH ANY ONE EVENT, THE INSURED SHALL
BEAR THE FIRST:
– PERIL
EXCESS
– COLLAPSE
R0,000
– STORM, WIND, TEMPEST, FLOOD, SNOW, R0,000
HAIL, SLEET, FROST
SUBSIDENCE, LANDSLIP
R0,000
DEFECTIVE DESIGN, PLAN,
R0,000
SPECIFICATION
FIRE, LIGHTNING, EXPLOSION
R0,000
THEFT, MALICIOUS DAMAGE
R0,000
SUGGESTED QUOTATION WORDING
WORKS PLUS PUBLIC LIABILITY - 9
• RATE AND PREMIUM BASED ON CONTRACT VALUE:
– CONTRACT WORKS
– THIRD PARTY LIABILITY
0,00%
0,00%
R000,000
R 00,000
• TERMS AND CONDITIONS OF QUOTATION:
• 1. THIS QUOTATION HOLDS GOOD FOR 90 DAYS FROM THE
DATE SHOWN AS THE “DATE OF QUOTATION”;
• 2. THE QUOTATION IS BASED ON THE UNDERWRITING
INFORMATION SUPPLIED BY THE INTERMEDIARY WHICH
SHALL FORM THE BASIS HEROF EXCEPT AS EXCLUDED
HEREIN SHOULD THERE BE ANY CHANGES IN THE
INFORMATION SUPPLIED THE COMPANY RESERVES THE
RIGHT TO AMEND THIS QUOTATION ACCORDINGLY;
• 3. THE DEFECTS EXCEPTION ENVISAGED HEREBY IS THE
‘COSTS ADDITIONAL’ ‘DE5’ ,LEG2’ ETC.;
CONTRACTOR’S LIABILITIES
• A CONTRACTOR CAN INCUR LIABILITIES FROM MANY
SOURCES THUS HE NEEDS A PACKAGE OF LIABILITY
COVERS OVER AND ABOVE THAT GIVEN UNDER A CONTRACT
WORKS OR CONSTRUCTION POLICY. IT CAN EVEN BE SAID
THAT A COMPREHENSIVE LIABILITY PACKAGE SHOULD
INCLUDE HIS POTENTIAL CONSTRUCTION RISKS
LIABILITIES. ACCORDINGLY, THE CONSTRUCTION POLICY
SHOULD EXCLUDE THE CONTRACTOR’S LIABILITIES,
HOWEVER, WHERE OTHER PARTIES ARE INVOLVED ON THE
CONSTRUCTION SITE THEY MAY NEED TO BE COVERED FOR
CONSTRUCTION LIABILITIES.
• THE QUESTION THEN ARISES, SHOULD THE CONSTRUCTION
POLICY WAIVE SUBROGATION RIGHTS AGAINST THE
CONTRACTOR?
CONTRACTOR’S LIABILITY POLICY -1
• LET US EXAMINE THE RECOMMENDED COMPONENTS TO A
COMPREHENSIVE CONTRACTOR’S LIABILITY POLICY:
– IT IS UNUSUAL FOR THIS TYPE OF POLICY TO BE
UNDERWRITTEN IN THE CONSTRUCTION OR ENGINEERING
DEPARTMENT IT IS MORE AN ACCIDENT DEPARTMENT RISK,
– FIRSTLY, WE MUST UNDERSTAND THAT THESE COVERS CAN
EITHER BE BASED ON “CLAIMS MADE” OR “CLAIMS INCURRED”
• THE FORMER BASIS RECOGNISES THAT ANY CLAIM LODGED
AGAINST THE INSURED DURIUNG A PARTICULAR PERIOD OF
INSURANCE, IRRESPECTIVE OF WHEN THE TRIGGERING EVENT
OCCURRED, SHALL BE REGARDED AS VALID AS LONG AS IT FALLS
WITHIN THE AMBIT OF THE POLICY,
• ON THE OTHER HAND ON A CLAIMS INCURRED BASIS ANY CLAIM
LODGED AGAINST THE INSURED MUST THEN REVERT TO THE
POLICY IN FORCE AT THE TIME THAT THE TRIGGERING EVENT
OCCURRED;
CONTRACTOR’S LIABILITY POLICY -2
• THE FOLLOWING ARE THE MORE COMMON SECTIONS TO A
COMPREHENSIVE Contractor’s Liability Policy:
– PUBLIC LIABILITY -GENERAL AND CONTRACTING LIABILITIES
– PRODUCTS LIABILITY –PRODUCTS MANUFACTURED OR SUPPLIED
– EMPLOYERS’ LIABILITY –INJURY OR SICKNESS ARISING OUT
OF EMPLOYMENT,
– PROFESSIONAL INDEMNITY –BREACH OF PROFESSIONAL
ACTIVITY OR DUTY,
– MOTOR EXCESS OF LOSS LIABILITY –DUE TO LOSS OR
ACCIDENT DURING THE PERIOD OF THE POLICY,
– PRODUCTS GUARANTEE –LIABILITY FOR PRODUCTS SUPPLIED,
SOLD ,INSTALLED ETC.,
– PRODUCT RECALL –WHERE SUCH PRODUCT MAY CAUSE INJURY
OR DAMAGE,
– CARRIERS LIABILITY –DAMAGE ARISING OUT OF THE
CARRIAGE OF GOODS INCLUDING CONSEQUENTIAL LOSS,
CONTRACTOR’S LIABILITY POLICY -3
• LIABILITY SECTIONS CONTINUED:
– PLANT HIRE LIABILITY –LEGAL LIABILITY FOR LOSS OR
DAMAGE IN TERMS OF A HIRE AGREEMENT INCLUDING
CONSEQUENTIAL LOSS,
– PURE ECONOMIC LOSS –CLAIMS MADE DURING THE PERIOD OF
INSURANCE OTHER THAN FOR PROFESSIONAL SERVICES FOR
COMPENSATION IN TORT, DELICT OR STATUTE;
– THE EXTENSIONS OF COVER ARE SIMILAR TO THOSE UNDER
THE MORE SPECIFIC CONSTRUCTION POLICY LIABILITY
SECTION;
– WHERE A MORE SPECIFIC POLICY INCLUDING LIABILITIES
HAS BEEN TAKEN OUT THE CONTRACTOR’S LIABILITY POLICY
WILL ONLY PROVIDE LIABILITY FOR DIFFERENCES IN COVER
OR LIMIT OF INDEMNITY, IT WILL NOT BE BROUGHT IN
– TO CONTRIBUTION WITH THE MORE SPECIFIC POLICY;
CONSTRUCTION PLANT INSURANCE - 1
• WHAT COMPRISES PLANT UNDER A CONSTRUCTION POLICY?
• MOBILE PLANT AND EQUIPMENT:
MOBILE CRANES, CRAWLER CRANES, DUMP TRUCKS,
BULLDOZERS, ROAD SCRAPERS, BACKACTORS, EXCAVATORS,
ROAD TANKERS (WATER, FUEL OR BITUMEN), ROAD ROLLERS;
• NON MOBILE PLANT AND EQUIPMENT:
– CONCRETE BATCH PLANT, CONCRETE MIXERS AIR
COMPRESSORS, ELECTRICITY GENERATING PLANT, MINI SUBSTATIONS, CONVEYOR SYSTEMS, TOWER CRANES, WELDING
GENERATORS AND TRANSFORMERS;
• MINING PLANT AND EQUIPMENT:
DRAGLINES, EXCAVATORS, JUMBO DRILL RIGS, MINING
SCOOPS, DUMP TRUCKS AND MINE WINDERS LONG WALL COAL
CUTTERS, MINING SCOOPS AND TUNNELL BORING MACHINES;
CONSTRUCTION PLANT INSURANCE - 2
• CLASSES OF OWNERSHIP:
– CONTRACTORS WHO OWN PLANT FOR CONTRACTING WORK;
– PLANT OWNED FOR OWN USE SUCH AS MINING OPERATIONS,
INDUSTRIAL WORKS AND SERVICE INDUSTRIES;
– PLANT HIRE COMPANIES FOR HIRE TO CUSTOMERS;
• VIRTUALLY EVERY PROJECT REQUIRES PLANT OF ONE TYPE
OR ANOTHER, LET US CONSIDER THE VARIOUS CATEGORIES
OF PLANT:
• CONSTRUCTION CONTRACTORS:
– BUILDING CONTRACTORS – CONCRETE BATCH PLANT, CRANES
MOBILE, CRAWLER AND TOWER, CONCRETE MIXERS, CONCRETE
ESCALATORS, PUMPS CONCRETE AND WATER, EXCAVATORS,
BACKACTORS AND THE LIKE
– ROAD CONSTRUCTION CONTRACTORS – THESE CONTRACTORS USE
A LARGE VARIETY OF PLANT SUCH AS, SCRAPERS,
EXCAVATORS, ROLLERS, BULLDOZERS, BACKACTORS, MOBILE
CRANES,AIR COMPRESSOR SETS, PAVING MACHINES ETC.;
CONSTRUCTION PLANT INSURANCE - 3
• MINING OPERATIONS (MAINLY OPENCAST):
– EXCAVATORS, DRAGLINES, JUMBO DRILLS, EARTH MOVING
TRUCKS, MINING SCOOPS, CONVEYOR SYSTEMS, CRUSHERS,
CRANES, COMPRESSORS, DIESEL GENERATING PLANT ETC.
– IN SOME INSTANCES THE PLANT MAY INCLUDE MINE WINDERS
– OR TUNNELL BORING MACHINES;
• PLANT HIRE COMPANIES:
– THEIR PURPOSE IS AS A SERVICE TO CONSTRUCTION, MINING
AND INDUSTRY, TO PROVIDE PLANT AND MACHINERY AS
REQUIRED FOR A VARIETY OF JOBS. SOMETIMES THESE HIRE
COMPANIES ARE A DIVISION WITHIN A CONSTRUCTION, MINING
OR INDUSTRIAL COMPANY, THE PURPOSE OF WHICH IS TO
SEPARATE THE COSTLY AND ONEROUS OWNERSHIP OF PLANT AND
MACHINERY FROM THEIR CORE BUSINESS, WHETHER THIS BE
CONSTRUCTION, MINING OR OTHER INDUSTRIAL ACTIVITY;
CONSTRUCTION PLANT INSURANCE – 4
THE NEED FOR INSURANCE
• THIS TYPE OF PLANT & EQUIPMENT IS GENERALLY HIGH
RISK, SUSCEPTIBLE TO IMPACT, FIRE, THEFT AND
ELEMENTAL PERILS. WE ARE NOT SUGGESTING THAT THE
USERS DO SO NEGLIGENTLY, CARELESSLY OR WITHOUT
REGARD FOR POSSIBLE DANGER OR DAMAGE. PLANT IS
USUALLY OPERATED BY A DEDICATED OPERATOR OR
OPERATORS, THUS THE ONUS FOR ANY UNDUE OPERATION
OF THE PLANT RESULTING IN DAMAGE COULD BE PEGGED
AT THE DOOR OF AN INDIVIDUAL. IT MUST BE
APPRECIATED THAT THIS TYPE OF PLANT HAS LARGE
QUANTITIES OF FUEL OIL AND HYDRAULIC OIL BOTH OF
WHICH ARE HIGHLY INFLAMABLE;
• DEPENDING ON THE TERRAIN IN WHICH IT WORKS
TOPPLING OVER OR OVERTURNING IS A VERY REAL RISK;
• IN VIEW OF THE ELEMENT OF RISK WHICH IS HIGH &
VARIED IT WOULD BE UNWISE NOT TO INSURE THE PLANT.
CONSTRUCTION PLANT INSURANCE – 5
THE INSURANCE POLICY COVER
• THE COVER IS SIMILAR FOR ALL CLASSES OF OWNERSHIP
• AS THIS EQUIPMENT IS ESSENTIALLY FOR OUTDOOR USE,
IT QUALIFIES FOR WHAT CAN BE TERMED ‘ALL RISKS’
COVER. THIS DOES NOT MEAN THAT THERE ARE NO TERMS
AND CONDITIONS APPLICABLE TO THE INSURANCE, INDEED
THERE ARE LIMITING FACTORS TO THE COVER. THE COVER
EMBRACES:
–
–
–
–
–
–
–
ELECTRICAL AND MECHANICAL BREAKDOWN (OPTIONAL COVER)
FIRE LIGHTNING EXPLOSION
ELEMENTAL PERILS
FLOOD
THEFT MALICIOUS DAMAGE
IMPACT COLLISION OVERTURNING
UNINTENTIONAL OVERLOADING
CONSTRUCTION PLANT INSURANCE – 6
THE INSURANCE POLICY EXCEPTIONS
• ALTHOUGH WE REFER TO THE COVER AS BEING ‘ALL RISKS’,
NEVERTHELESS THERE ARE SOME EXCEPTIONS THESE ARE AS
FOLLOWS:
–
–
–
–
–
–
–
–
–
–
WEAR AND TEAR AND GRADUAL DETERIORATION;
PENALTIES FOR DELAY AND GUARANTEES OF PERFORMANCE;
LOSS OF USE;
TYRES AND TUBES;
EXPENDABLE PARTS AND TOOLS;
THEFT NOT IDENTIFIABLE WITH A SPECIFIC INCIDENT;
TANDEM OR MULTIPLE LIFTS;
EXISTING DEFECTS, WILFUL ACTS OR NEGLIGENT ACTS;
EXPERIMENTS OR INTENTIONAL OVERLOADING;
WHILST BEING OPERATED BY A PERSON:
• UNDER THE INFLUENCE OF INTOXICATING LIQUOR OR DRUGS,
• AUTHORISED BY THE OWNER OR HIS RESPONSIBLE PERSON WHO IS NOT
QUALIFIED TO OPERATE THE PLANT
– ELECTRICAL OR MECHANICAL BREAKDOWN (IF OPTION NOT
REQUIRED);
CONSTRUCTION PLANT INSURANCE – 7
HIRED-IN PLANT POLICY AMENDMENT
• THE POLICY WORDING IS GENERALLY SIMILAR WHETHER
COVERING OWNED PLANT OR HIRED-IN PLANT, TO ACHIEVE
THE ADJUSTMENT TO THE STANDARD POLICY THE
FOLLOWING MEMORANDA ARE INCLUDED:
– A) THE INSURED’S LEGAL LIABILITY UNDER ANY HIRING
AGREEMENT TO PAY COMPENSATION FOR PHYSICAL LOSS OF OR
DAMAGE TO ANY INSURED HIRED-IN MACHINERY WHILST UNDER
HIS CUSTODY OR CONTROL AT THE INSURED’S PREMISES
DESCRIBED IN THE SCHEDULE HERETO;
– B) THE INSURED’S LEGAL LIABILITY UNDER ANY HIRING
AGREEMENT TO PAY CONTINUING HIRE CHARGES IN
CONSEQUENCE OF PHYSICAL LOSS OF OR DAMAGE TO THE
INSURED HIRED-IN MACHINERY DESCRIBED IN THE SCHEDULE
HERETO FOLLOWING INDEMNIFIABLE LOSS OR DAMAGE
PROVIDED FOR IN A) ABOVE;
• AS PREVIOUSLY STATED THE POLICY REQUIRES THAT ANY
HIRING AGREEMENT SHALL BE NO MORE ONEROUS THAN THE
CPHA CONDITIONS.
CONSTRUCTION PLANT INSURANCE – 6
HIRED IN/OUT PLANT & MACHINERY
• THIS PLANT AND EQUIPMENT IS HIRED IN/OUT UNDER
SPECIFIC HIRING CONDITIONS. INSURERS PREFER THE
CONDITIONS AS PUBLISHED BY THE PLANT HIRE
ASSOCIATION KNOWN AS THE CPHA CONDITIONS. THE
CPHA CONDITIONS ARE CONSIDERED TO BE THE MOST FAIR
FROM BOTH THE OWNER’S AND THE HIRER’S POINTS OF
VIEW. IN FACT, A POLICY COVERING HIRED PLANT
OFTEN INCLUDES A MEMORANDUN WHICH STATES:
– “THIS INSURANCE IS BASED ON HIRING AGREEMENTS NO MORE
ONEROUS THAN THOSE PUBLISHED BY THE CONTRACTOR’S
PLANT HIRE ASSOCIATION, SHOULD PLANT HAVE BEEN HIRED
UNDER OTHER HIRING AGREEMENTS THEN ANY LOSS OR DAMAGE
COVERED UNDER THIS POLICY WILL BE ADJUSTED AS IF THE
CPHA CONDITIONS HAD BEEN IN FORCE”
CONSTRUCTION PLANT INSURANCE – 7
RISK ASSESSMENT
• THE INFORMATION REQUIRED EMBRACES THE FOLLOWING:
– IS THE PLANT OWNED OR HIRED IN;
– IF HIRED IN, THE APPLICABLE CONDITIONS OF HIRE;
– THE TYPE OF HIRED IN PLANT AND THE HIRE CHARGE FOR THE
PERIOD OF HIRE;
– WHETHER ANY HIRED IN ITEM HAS A REPLACEMENT VALUE EXCEEDING
R------ (NOT ALL INSURERS REQUIRE THIS)
– FOR OWNED PLANT A FULL SCHEDULE OF PLANT TO BE INSURED AND
THE NEW REPLACEMENT VALUE OF EACH ITEM;
– DETAILS OF TOWER CRANES AND OTHER CRANES OWNED OR HIRED IN
TOGETHER WITH COPIES OF THEIR LAST INSPECTION REPORT;
– WHETHER THERE ARE TO BE ANY TANDEM OR MULTIPLE LIFTS,
DETAILS THEREOF,INSURERS RESERVE RIGHT OF EVALUATION;
– AGE OF ROPES AND SLINGS AND LATEST INSPECTION REPORT;
– WHETHER LIFTING APPARATUS FITTED WITH LOAD GUAGES;
– CERTIFICATE OF COMPETENCY OF CRANE OPERATORS;
– EXPERIENCE OF RIGGERS WHO WILL CONTROL LIFTING;
– DETAILS OF LOSSES OVER LAST THREE YEARS.
CONSTRUCTION PLANT INSURANCE – 8
CPHA HIRE CONDITIONS
THE FOLLOWING IS A RESUME OF THE CPHA HIRE AGREEMENTS
• THE HIRER MAY NOT CEDE ASSIGN NOR SUBLET THE AGREEMENT
IN ANY WAY;
• THE OWNER HAS AT ANY TIME THE RIGHT OF ACCESS TO SITE TO
EXAMINE THE HIRED-IN PROPERTY;
• THE HIRER MUST ENSURE THAT OR AT HIS OWN COST CREATE A
SUITABLE WORKING TABLE FOR THE SAFE OPERATION OF ANY
HIRED IN CRANE, FAILING WHICH THE AGREEMENT SHALL BE
NULL AND VOID;
• THE HIRER IS OBLIGED TO NOTIFY THE OWNER OF ANY DEFECTS
IN THE PLANT AT THE TIME OF DELIVERY OR ANY DEFECTS THAT
MAY DEVELOP DURING THE HIRE PERIOD, THE PLANT SHALL
CEASE TO BE USED, ANY DAMAGE THAT MAY OCCUR DUE TO
CONTINUED USE SHALL BE FOR THE COST OF THE HIRER;
• THE PLANT IS TO BE USED ONLY WITHIN ITS RATED CAPACITY,
IN THE CASE OF CRANES NO TANDEM LIFTS, UNLESS AGREED TO
CONSTRUCTION PLANT INSURANCE – 9
CPHA HIRE CONDITIONS
• THE OWNER’S OPERATOR BECOMES THE SERVANT OF THE
HIRER WHO HAS THE ABSOLUTE CONTROL OF HIS ACTIONS;
• RISK OF LOSS OR DAMAGE PASSES TO THE HIRER ONLY ON
DELIVERY TO SITE UNLESS THE HIRER HAS ARRANGED
TRANSIT OF THE PROPERTY TO SITE FROM THE OWNER’S
PREMISES IN WHICH CASE THE HIRER IS RESPONSIBLE;
• THE HIRER INDEMNIFIES THE OWNER FOR ALL LIABILITY
ARISING OUT OF THE USE OF THE PLANT BY THE HIRER;
• THE HIRER SHALL BE RESPONSIBLE FOR ON-GOING HIRE
CHARGES DUE TO INCLEMENT WEATHER OR NORMAL
MAINTENANCE OR REPAIRING PUNCTURES AND THE LIKE
• THE HIRER SHALL NOT BE LIABLE FOR ON-GOING HIRE
CHARGES DUE TO UNAVAILABILITY OF ANY OWNER’S
OPERATOR OR DUE TO BREAKDOWN FROM INHERENT DEFECT;
• THE HIRER ACCEPTS LIABILITY FOR DIRECT & CONS LOSS
CONSTRUCTION PLANT INSURANCE –10
CPHA HIRE CONDITIONS
• THE HIRER IS RESPONSIBLE FOR THE INSURANCE DURING
THE HIRE PERIOD;
• ANY BREACH OF CONDITIONS OF THE AGREEMENT OR ACT
OF INSOLVENCY OR BEING PLACED UNDER JUDICIAL
MANAGEMENT THE OWNER MAY REPOSSES THE PLANT ON
HIRE AND WILL BE ENTITLED TO THE HIRE FEES DUE FOR
THE FULL AND UNEXPIRED HIRE PERIOD;
• IN THE CASE OF CRANES AND MOBILE PLANT HIRE FEES
WILL BE BASED ON TIME SHEETS PREPARED BY THE PLANT
OPERATOR AND SIGNED BY THE HIRER;
• THERE IS NO OBLIGATION ON THE OWNER TO SUPPLY
SLINGS, IF THESE ARE SUPPLIED NO RESPONSIBILITY IS
ACCEPTED BY THE OWNER WHO HAS NO CONTROL OVER USE;
• TYRES AND TUBES ARE THE RESPONSIBILITY OF HIRER;
• PLANT MAY BE RECALLED FOR REPAIR BY THE OWNER.
EMPLOYER’S LIABILITY - 1
• EMPLOYER’S LIABILITY:
• TO WHOM DO THE EMPLOYERS HAVE A POTENTIAL
RESPONSIBILITY TO PAY COMPENSATION FOR INJURIES OR
DISEASE DUE TO THEIR OCCUPATION,UNDER WHAT LAW:
– PRIOR TO 1994 ALL EMPLOYEES EARNING LESS THAN A
SPECIFIED AMOUNT, SPECIFIED IN TERMS OF THE WORKMANS
COMPENSATION ACT (WCA), WERE CLASSED AS ‘WORKMEN’.
THEY OR THEIR DEPENDANTS COULD CLAIM COMPENSATION
UNDER THE ACT, BUT HAD NO LEGAL RIGHT TO SUE THEIR
EMPLOYERS;
– THOSE WORKMEN EARNING IN EXCESS OF THE PRESCRIBED
AMOUNT WERE IN TERMS OF THE ACT CLASSED AS ‘NONWORKMEN’
– ‘NON WORKMEN’ WERE PRECLUDED FROM CLAIMING
COMPENSATION FOR OCCUPATIONAL INJURIES OR DISEASE,
UNDER THE WORKMAN’S COMPENSATION ACT, BUT WERE ABLE
TO CLAIM COMPENSATION FROM THEIR EMPLOYERS FOR SUCH
INJURIES OR DISEASE, ACCORDINGLY, MOST EMPLOYERS TOOK
OUT EMPLOYER’S LIABILITY INSURANCE
EMPLOYER’S LIABILITY - 2
– IN 1994 THE COMPENSATION FOR OCCUPATIONAL
INJURIES AND DISEASES ACT (130 OF 1993) WAS
PROMULGATED, COMMONLY KNOWN AS THE ‘COID ACT’;
– IN TERMS OF THE ACT ALL EMPLOYEES (THE BENEFITS
ARE ‘PEGGED’ TO BE A DEFINED INCOME LEVEL) AND
PRECLUDES EMPLOYEES FROM CLAIMING COMPENSATION
FROM THEIR EMPLOYERS FOR INJURIES OR DISEASE
ARISING OUT OF THEIR OCCUPATION, ONLY IN
EXCEPTIONAL CASES WHERE EMPLOYMENT IS NOT
CLASSIFIED AS ‘EMPLOYEES’ ARE THEY FREE TO SUE
THEIR EMPLOYER FOR COMPENSATION UNDER COMMON
LAW FOR SUCH INJURIES OR DISEASES;
– THE ‘COID ACT’ DEFINITION OF ‘EMPLOYEE’
INCLUDES APPRENTICES AND LEARNERS, BUT NOT
THOSE CONTRACTED TO CARRY OUT WORK FOR THE
EMPLOYER OR THEIR SUB-CONTRACTORS;
– CONSEQUENTLY EMPLOYERS LIABILITY CLAIMS ARE
RARE
EMPLOYER’S LIABILITY - 3
• UNDER A MODERN EMPLOYER’S LIABILITY POLICY, DEATH AND
BODILY INJURY INCLUDES DISEASE OR ILLNESS. THIS COVER IS
UNLIKE PUBLIC LIABILITY POLICIES IN THAT PROPERTY DAMAGE
IS NOT INCLUDED;
• IT IS IMPORTANT TO UNDERSTAND THAT UNDER THE USUAL
EMPLOYERS LIABILITY, INJURY OR ILLNESS MUST OCCUR DURING
THE PERIOD OF INSURANCE. THE CLAIM MAY BE MADE AND THE
INSURER’S LIABILITY ARISE MANY YEARS AFTER THE CAUSE OF
THE ACTION, EVEN AFTER THE ORIGINAL INSURER IS OFF RISK.
THIS EQUATES TO A CLAIMS INCURRED WORDING. THE INSURER
WHO WAS ON RISK AT THE TIME THE CAUSE OCCURRED IS THE
INSURER RESPONSIBLE FOR THE CLAIM.
EMPLOYER’S LIABILITY - 4
IT IS RECOMMENDED THAT THIS CHAPTER (8) OF THE IISA
CONSTRUCTION INSURANCE STUDY BOOK BE CAREFULLY READ
• THE COID ACT PROVIDES FOR COMPENSATION FOR DISABLEMENT
CAUSED BY OCCUPATIONAL INJURIES OR DISEASES SUSTAINED OR
CONTRACTED BY EMPLOYEES IN THE COURSE OF THEIR
EMPLOYMENT, OR DEATH FROM SUCH INJURIES OR DISEASE.
– DISABLEMENT INCLUDES CONVENTIONAL BODILY INJURY UNDER A
CONVENTIONAL EMPLOYER’S LIABILITY POLICY;
– DISABLEMENT AS DEFINED BY COID MEANS TEMPORARY PARTIAL
DISABLEMENT TEMPORARY TOTAL DISABLEMENT, PERMANENT
DISABLEMENT OR SERIOUS DISFIGUREMENT;
– COID AFFORDS A MORE COMPREHENSIVE COVER THAN A NORMAL
EMPLOYER’S LIABILITY POLICY. UNDER AN EMPLOYER’S LIABILITY
POLICY, THE EMPLOYER HAS TO BE NEGLIGENT BEFORE A VALID
CLAIM CAN ARISE. COID DOES NOT REQUIRE NEGLIGENCE ON THE
PART OF THE EMPLOYER. IT IS SUFFICIENT FOR THE DISABLEMENT
TO BE AS A RESULT OF AN ACCIDENT NOT NECESSARILY DUE TO
NEGLIGENCE. THUS COID HAS A WIDER APPLICATION.
PROJECT 3
TO BE PRESENTED AT NEXT SESSION
• An Employee, let us call him Joe, while working on
a machine in the production shop and, not wearing
a safety belt slips and falls to the ground some 4
metres below and breaks his leg, it is a compound
fracture. He is incapacitated for six weeks while
the bone heals, he cannot attend work, but returns
to work at the beginning of the seventh week,
although, the sore on his leg has not completely
healed. Some three weeks later, when the sore
still has not healed he visits his Doctor again
and the Doctor identifies that gangrene has set in
and is at an advanced stage, unfortunately, the
only remedy is to amputate his leg.
• How will he be compensated under the Coid Act,
would he have been treated any different under a
Employer’s Liability Policy? What would the Coid
Act Commissioner say about the lack of Safety
belt?
PROFESSIONAL INDEMNITY INSURANCE
1
• THIS IS A CLASS OF LIABILITY INSURANCE;
• THE LAW RELATING TO DEFECTS IN BUILDINGS AND
STRUCTURES AS WELL AS THAT RELATING TO ECONOMIC
LOSS HAS BECOME ONEROUS TO CONTRACTORS, ENGINEERS,
ARCHITECHTS, SURVEYORS AND OTHER PROFESSIONALS;
• AS A CONSEQUENCE PROFESSIONAL INDEMNITY INSURANCE
HAS BECOME OF GREAT SIGNIFICANCE TO PROFESSIONAL
BODIES;
• THE COVER IS ON A CLAIMS MADE BASIS IN OTHER WORDS
IF A CLAIM IS FIRST MADE AGAINST AN INSURED SOME
TIME AFTER THE OCCURRENCE OF THE EVENT THAT GAVE
RISE TO THE CLAIM, THEN THE INSURER WHO IS
CURRENTLY ON RISK SHALL BECOME LIABLE TO INDEMNIFY
THE INSURED FOR THE CLAIM
PROFESSIONAL INDEMNITY INSURANCE
2
• THE PRIMARY FUNCTION OF THE POLICY IS TO PROVIDE
FOR FINANCIAL OR ECONOMIC LOSS IN OTHER WORDS
LOSSES NOT ACCOMPANIED BY PHYSICAL DAMAGE OR
BODILY INJURY;
• IT IS IMPORTANT TO FULLY DESCRIBE ALL THE
ACTIVITIES OF THE INSURED IN THE RECITAL CLAUSE AS
THE INDEMNITY APPLIES TO THE STATED BUSINESS AND
NO OTHER FOR EXAMPLE ‘DESIGN AND CONSTRUCT
CONTRACTORS’, ARCHITECHTS, DESIGN ENGINEERS ETC.;
• IT IS A LEGAL LIABILITY POLICY, THUS THE INSURER’S
OBLIGATION TO INDEMNIFY ONLY BECOMES PAYABLE ONCE
THE INSURED HAS BEEN FOUND TO BE LEGALLY LIABLE;
• PROFESSIONAL INDEMNITY IS NOT A CONTRACT BASED ON
MORAL OR COMMERCIAL CONSIDERATIONS
PROFESSIONAL INDEMNITY INSURANCE
3
• COVER IS BASED ON BREACH OF PROFESSIONAL DUTY;
• THE CLAIM HAS TO BE MADE (AS PREVIOUSLY DISCUSSED)
DURING THE PERIOD OF INSURANCE;
• COVER ENVISAGES CLAIMS ARISING OUT OF ‘NEGLIGENT
ACTS, ERRORS OR OMISSIONS’ THESE WORDS HAVE NEVER
BEEN DEFINED, SOME LEGAL CASES TAKE THE VIEW THAT
THEY REFER TO NEGLIGENCE ONLY, THERE ARE, OF
COURSE, OTHER INTERPRETATIONS;
• IN THE CASE WIMPY CONSTRUCTION UK LTD. VS
POOLE(1984) IT WAS HELD THAT THE TERM” OMISSION
ERROR OR NEGLIGENT ACT” COVERED AN OMISSION OR
ERROR WITHOUT NEGLIGENCE, EVEN THOUGH AN ANCILLARY
CLAUSE IN THE POLICY REFERRED TO NEGLIGENT ACT,
ERROR OR OMISSION
PROFESSIONAL INDEMNITY INSURANCE
4
• THE DESIGN AND CONSTRUCT POLICY WORDING EXCLUDES
ANY LIABILITY ARISING DUE TO THE INSURED
(CONTRACTOR) HAVING GIVEN AN EXPRESS WARRANTY OR
GUARANTEE THAT INCREASES THE INSURED’S LIABILITY.
THIS EXCLUSION DOES NOT APPLY TO LIABILITY WHICH
WOULD HAVE ATTACHED IN THE ABSENCE OF SUCH EXPRESS
WARRANTY OR GUARANTEE;
• THE P.I. POLICY REFERS NOT ONLY TO THE INSURED
NAMED IN THE SCHEDULE , BUT ALSO TO PREDECESSORS
IN BUSINESS OR ANY EMPLOYEE OF THE INSURED;
• WHEN BUSINESSES AMALGAMATE OR SPLIT UP, THE
APPLICATION OF THE PREDECESSORS TO BUSINESS CLAUSE
CAN GIVE RISE TO DIFFICULTIES;
• WHERE THERE HAS BEEN A RECENT AMALGAMATION OR
SPLIT IT IS IMPORTANT TO ASCERTAIN EXACTLY WHAT
THE LIABILITIES OF THE NEW AND OLD BUSINESSES ARE.
PROFESSIONAL INDEMNITY INSURANCE
5
• NEGLIGENCE BY EMPLOYEES OF THE INSURED OR
EMPLOYEES OF PREDECESSORS IN BUSINESS IS ALSO
COVERED. MISTAKES BY EMPLOYEES ARE THE MOST
FREQUENT CAUSE OF CLAIMS UNDER A P.I. POLICY;
• THE P.I. POLICY ALSO PROTECTS THE INSURED AGAINST
ANY LIABILITY HE MAY INCUR ARISING OUT OF THE USE
OR EMPLOYMENT OF AGENTS;
• THIS SUBJECT IS MAINLY A PUBLIC LIABILITY COVER
AND WILL BE COVERED MORE EXTENSIVELY BY THE PUBLIC
LIABILITY COURSE, WE THEREFORE, DO NOT INTEND TO
GO FURTHER INTO THIS SUBJECT.
BUILDING DEFECTS INSURANCE
1
• OTHERWISE KNOWN OVERSEAS AS DECENNIAL LIABILITY;
• IT HAS ITS ORIGINS IN NAPOLEONIC LAW;
• IT ONCE AGAIN GAINED POPULARITY AFTER THE FIRST
WORLD WAR WHEN CONSIDERABLE CONSTRUCTION WAS
TAKING PLACE IN EUROPE;
• THE POLICY COVERS INHERENT DEFECTS IN BUILDING
STRUCTURES WHICH ONLY BECOME MANIFEST AFTER THE
COMPLETION OF CONSTRUCTION, WHERE THIS THREATENS
THE STABILITY OF THE STRUCTURE DUE TO DESIGN PLAN
SPECIFICATION MATERIALS OR WORKMANSHIP LANDSLIP
SUBSIDENCE OR HEAVE IS ALSO COVERED;
• THE COVER IS BASED ON THE DESIGN PLAN AND
SPECIFICATION BEING FULLY DIVULGED TO INSURERS FOR
APPROVAL BY THEIR CONSULTANTS AND THAT GEOTECHNIC
AND HYDROLOGY TESTS ARE CARRIED OUT ON THE SITE
AND THE RESULTS ARE GIVEN TO INSURERS FOR APPROVAL
• COVER MUST BE APPLIED FOR BEFORE COMMENCEMENT
BUILDING DEFECTS INSURANCE
2
• THE PRIMARY COVER EXCLUDES WATERPROOFING OF THE
BUILDING ENVELOPE, HOWEVER, THIS DOES NOT EXCLUDE
DAMAGE TO THE STRUCTURE AS A CONSEQUENCE OF FAULTY
WEATHER PROOFING;
• INSURER’S CONSULTANTS MUST BE GIVEN ACCESS TO SITE
THROUGHOUT THE CONSTRUCTION PERIOD;
• AFTER PRACTICAL COMPLETION A FURTHER INSPECTION OF
THE ASPECTS THAT REQUIRED RECTIFICATION OR
ATTENTION, ONCE SATISFACTORY COMPLETION HAS
OCCURRED, BUILDING DEFECTS COVER CAN BE CONFIRMED;
• COVER GENERALLY EXCLUDES FIRE AND ALLIED PERILS,
DAMAGE DUE TO ALTERATIONS, MODIFICATIONS OR
EXTENSIONS INADEQUATE MAINTENANCE OR WHERE THE
DESIGN LOAD HAS BEEN EXCEEDED;
• THIS COVER DOES NOT TAKE PRECEDENCE TO THE
MAINTENANCE COVER AFFORDED BY THE CONSTRUCTION
POLICY.
CONSEQUENTIAL LOSS
DUE TO CONSTRUCTION ACCIDENTS
• THERE ARE A VARIETY OF CONSEQUENTIAL LOSS COVERS
THAT MAY BE TRIGGERED BY CONSTRUCTION RISKS, BOTH
THE EMPLOYER AND THE CONTRACTOR CAN BE EXPOSED TO
LOSSES AS A RESULT OF CONSTRUCTION ACCIDENTS;
• THE COVERS ENVISAGED ARE:
–
–
–
–
INCREASED COST OF WORKING – CONTRACTORS,
ADVANCE LOSS OF RENT – EMPLOYERS AND DEVELOPERS,
ADVANCE LOSS OF INTEREST – EMPLOYERS AND DEVELOPERS,
ADVANCE PROFITS/DELAYED START UP.- EMPLOYERS
• WE WILL EXAMINE EACH OF THESE INDIVIDUALLY
INCREASED COST OF WORKING
• ACCIDENTS ON SITE CAN CAUSE DELAYS IN COMPLETION
OR EVEN IN A WORST CASE SCENARIO THE TOTAL LOSS OF
CONSTRUCTED WORKS, SAY BY FIRE OR FLOOD ETC.
ACCORDINGLY THE CONTRACTOR MAY BE AT A LOSS DUE TO
HAVING TO CONTINUE TO REMUNERATE WORKERS AND PAY
CONTINUING HIRE CHARGES FOR PLANT AND MACHINERY
DAMAGED IN THE EVENT. THE CONTRACTOR WILL AS A
RESULT BE OUT OF POCKET AS HE WILL NOT BE ABLE TO
RECOUP THE INCREASED COSTS. COVER FOR SUCH LOSSES
IS AVAILABLE IN THE MARKET BUT SUBJECT TO A TIME
EXCLUSION AND INDEMNITY PERIOD, THE PREMIUM CHARGE
IS NOT CHEAP.
ADVANCE LOSS OF RENT OR INTEREST
• THIS COVER IS MAINLY DIRECTED AT EMPLOYERS, BEING
PROPERTY OWNERS OR DEVELOPERS, WHO MAY SUFFER RENT
LOSSES DUE TO DELAYED OR NON COMPLETION OF THE
WORKS. PART OF THE FEASABILITY STUDY BEFORE
ENTERING INTO ANY CONTRACT FOR CONSTRUCTION, OR
EVEN PURCHASING THE LAND, THE EMPLOYER EVALUATES
THE OVERALL COST TO HIM AND AT WHAT POINT HE WILL
START TO RECEIVE EARNINGS FROM HIS INVESTMENT. IT
MUST BE REMEMBERED THAT HE IS EITHER USING HIS
OWNN FINANCE OR HE IS TAKING OUT LOANS TO COVER
THE COST OF DEVELOPMENT IN EITHER CASE HE IS
EITHER LOSING INTEREST ON VESTED CAPITAL OR HE IS
PAYING INTEREST ON THE LOAN. THE CONSTRUCTION
PERIOD IS THUS VITAL TO HIS POTENTIAL COST
ADVANCE PROFITS OR DELAYED
START-UP - 1
• THIS COVER IS ALLIGNED MAINLY TO PRODUCTION
PROCESSES. INVESTORS WHO PUT MONEY INTO A VENTURE
DO SO FOR THE PURPOSE OF INCREASING THEIR WEALTH
THROUGH SUCH INVESTMENT, ACCORDINGLY, THEY EXPECT
THE EARNINGS OF THE VENTURE TO COMMENCE ON
SCHEDULE;
• THE VENTURE MAY BE AN INDUSTRIAL MANUFACTURING
PROCESS, MINING OR A CHEMICAL OR PETRO-CHENICAL
FACILITY;
• IRRESPECTIVE OF THE NATURE OF THE VENTURE, WHEN
THE OPERATIONS RUN LATE, THIS BRINGS ABOUT AN
UNEXPECTED LOSS TO THE INVESTOR. HAPPILY, HE CAN
INSURE AGAINST THIS EVENTUALITY UNDER AN ADVANCE
PROFITS POLICY;
• THE ADVANCE PROFITS POLICY IS ONLY TRIGGERED BY AN
INDEMNIFIABLE EVENT UNDER THE CONSTRUCTION POLICY.
ADVANCE PROFITS OR DELAYED
START-UP - 2
• THE SUM INSURED UNDER THIS POLICY IS A FIXED
AMOUNT BASED ON THE EXPECTED EARNINGS OF THE
BUSINESS DURING THE PERIOD OF INDEMNITY SAY 12
MONTHS, THE COVER IS SUBJECT TO AVERAGE.
• THERE IS, HOWEVER, A DEDUCTIBLE APPLICABLE TO THE
INDEMNITY, THIS IS A TIME EXCLUSION WHICH IS
USUALLY QUITE LENGTHY FOR COMPLEX PRODUCTION
PROCESSES AND MINING, THIS COULD EXTEND TO THREE
MONTHS, MOST STANDARD TRIED AND TESTED PROCESSES
WOULD HAVE A 1 TO 3 WEEK EXCLUSION PERIOD, BUT
NEVER LESS THAN 3 DAYS.
• SOME PROCESSES SUCH AS PETRO-CHEMICAL RISKS HAVE
AN EXCLUSION OF COVER DURING THE FIRST 7 DAYS OF
TESTING, IN OTHER WORDS ANY ACCIDENT OR FAILURE
DURING THE FIRST 7 OPERATING DAYS, WHILE COVERED
UNDER THE WORKS POLICY WOULD NOT QUALIFY FOR
INDEMNITY UNDER THE ADVANCE PROFITS POLICY.
ADVANCE PROFITS OR DELAYED
START-UP - 3
• CLEARLY, THE COVER MUST BE BASED ON A REALISTIC
COMPLETION DATE (DATE ON WHICH COMMERCIAL
PRODUCTION IS EXPECTED TO COMMENCE).
• THE CLIENT HAS AN OBLIGATION TO KEEP THE INSURER
INFORMED ON OCCURRENCES AND EVENTS THAT MAY HAPPEN
OR OCCUR THAT WOULD DELAY OR RETRACT THE
COMPLETION DATE, THUS AFFECTING THE COVER UNDER
THE POLICY. THE INSURER IS GIVEN ACCESS TO THE
CONSTRUCTION SITE AT ANY REASONABLE TIME TO ENSURE
THE WORK IS BEING UNDERTAKEN UNDER GOOD
ENGINEERING PRACTICES AND TO QUANTIFY THE
COMPLETION DATES OF INDIVIDUAL COMPONENTS AND THE
INTEGRITY OF THE PROJECT AS A WHOLE.
• THE INSURER ALSO HAS THE RIGHT TO TAKE OVER AND
CONTROL ANY REPAIR OR REPLACEMENT PROCEDURE TO
ENSURE THAT THE WORK IS UNDERTAKEN EXPEDITIOUSLY
AND TO PROPER STANDARDS OF ENGINEERING EXCELLENCE.
BONDS - 1
• CONTRACTORS ARE INVARIABLY REQUIRED TO PROVIDE
CERTAIN TYPES OF BOND OR GUARANTEE. THE PROVIDERS
OF THESE BONDS OR GUARANTEES ARE EITHER A BANK OR
INSURANCE COMPANY. THE MOST USUAL BONDS ARE:
– PERFORMANCE BONDS:
THIS IS ONE OF THE MOST
IMPORTANT BONDS GIVEN BY A CONTRACTOR, IT IS
FURNISHED BY THE CONTRACTOR BEFORE THE START OF THE
CONTRACT. ITS SOLE PURPOSE IS TO PROTECT THE
EMPLOYER AGAINST BREECH OF CONTRACT BY THE
CONTRACTOR;
– BID OR TENDER BOND: THIS BOND IS SUBMITTED BY THE
CONTRACTOR WITH HIS BID OR TENDER, THUS SHOWING THE
EMPLOYER THAT HIS BID IS REASONABLE AND IF ACCEPTED
THE CONTRACTOR WILL SIGN A CONTRACT TO PERFORM THE
WORK INCLUDING ANY BOND REQUIREMENTS. THE BOND IS
FORFEITED IN FAVOUR OF THE EMPLOYER IF THE CONTRACTOR
FAILS TO PERFORM THE WORKS SPECIFIED IN THE TENDER
BONDS - 2
– ADVANCE PAYMENT BONDS: THIS IS SIMILAR TO A PERFORMANCE
BOND. IT AMOUNTS TO A GUARANTEE BY THE CONTRACTOR THAT ANY
AMOUNTS ADVANCED BY THE EMPLOYER WILL NOT BE LOST DUE TO
POOR PERFORMANCE BY HIM AT A LATER STAGE IN THE CONTRACT;
– RETENTION BOND:
THIS BOND ENSURES THAT THE CONTRACTOR,
ONCE THE CONTRACT MOVES INTO THE DEFECTS LIABILITY OR
MAINTENANCE PERIOD WILL FULFILL HIS OBLIGATIONS. THIS BOND
IS ISSUED IN LIEU OF THE EMPLOYER WITHHOLDING RETENTION
MONIES UNTIL THE EXPIRY OF THE DEFECTS LIABILITY OR
MAINTENANCE PERIOD.
• FEW INSURANCE COMPANIES UNDERWRITE BONDS AND THE SUBJECT
IS ONE OF MAJOR COMPLEXITY AND TO COVER THE SUBJECT
EFFECTIVELY WOULD TAKE AT LEAST TWO SESSIONS, THEREFOR
WE WILL LEAVE THE SUBJECT AT THIS POINT