Business matters and job planning

Whatever your profession or trade, it is essential you consider insurance in the round and not just from a professional indemnity (PI) stand point.

Professional indemnity (PI) insurance

If you are a member of a professional body you should verify the extent of your PI cover and any caveats that may apply to it. For instance, it might restrict those in the practice who are not yet qualified, or who have less than a given number of years of experience from working unsupervised – precluding sending someone out to site for a quick check if there are more onerous implications.

Always check the scope and caveats in your PI policy and if you don’t currently have PI, then get it. Most professional bodies and trade associations will be able to advise you on the most appropriate policy for the work you undertake; and many, such as RICS, have negotiated discount cover for their members.

Traditional PI products are usually based on the experience of the practice and the percentage/ proportion of the types of work undertaken – valuation work probably attracting the most heavily loaded premiums to reflect the claims risk.

You may find that your ‘normal’ PI policy does not include cover for structural calculation work, so you should establish exactly how this is specified in the policy. For example, if you subcontract this function to a consultant you may pick up a proportion of the liability (usually in proportion to the fee split which is considered to reflect the apportionment of risk too).

Consequently you may find it more appropriate to get subconsultants to contract directly with the client for this sort of advice and ensure you do not put yourself in a position of vicarious liability by overly recommending one consultant above another.

Fortunately, claims for engineering consultancy are comparatively rare, but that is no reason to be complacent.

It is essential that you check what cover is available, if you propose to specify and manage building repairs work.

Contract administration is straightforward and, essentially, so too is project management. However, insurers may perceive the risks differently, and certainly a project manager is likely to have more liabilities based on current interpretations of case law. One of these liabilities is to check that appropriate insurances – for the works – are effected where needed.

Project-specific insurance

Typically the contractor insures ‘the works’, and if new work is being done to an existing building then the owner or occupier insures the existing building fabric and contents.

At the time of writing, the minimum level of third party insurance cover is £2 million.

However, you should carefully consider the options in the contract. Contracts are discussed in more detail in Building contracts and tenders, but suffice to say here that not all contracts offer the same options. For example, Section 5 of the JCT Minor Works contract sets out the insurance provisions, giving two alternatives (Clause 5.4a and 5.4b) for insuring ‘the works’:

• Clause 5.1: establishes the contractor’s broad liability for personal injury or death and related loss claims in respect of progress of the works (except of course where the employer has a duty/ responsibility).
• Clause 5.2: likewise establishes the detail of the contractor’s liability for injury or damage to third party property but not ‘the works'.
• Clause 5.3: establishes the contractor’s obligation to indemnify the employer for Clauses 5.1 and 5.2 and to take out the appropriate insurance in addition.
• Clause 5.4a: sets a duty on the contractor to insure in the joint names of the employer and the contractor the works and site materials for loss or damage to full reinstatement value plus fees.
• Clause 5.4b: provides a second option: the employer insures in the joint names of the employer and contractor to cover any existing buildings (and contents).

Although the contractor is required to demonstrate that insurance is in place, the second option is likely to be the most common where improvements or repairs are being made to an existing property.

The most cost-effective option may be for the owner to notify the existing insurers and amend the policy with a ‘joint names cover’ for the period of the contract.

If you are acting as contract administrator you have a duty to tell the employer of their obligations in this regard.

Warn clients about their obligation It’s tempting to think this is overkill, but even if the issue only reaches the level of a ‘small claim’ the costs can soon mount up. Consider the consequences if, during the course of extending or making repairs to a roof, defective sheeting let in the rain, causing considerable water damage to the part-completed internal repair/improvement works. Think of the potential damage to personal possessions, or drowned home or office computers and paperwork, plus the consequential losses possible from loss of work or working ability, or the hotel or rental costs of other temporary accommodation while the problem is rectified!

Expecting the unexpected

Sometimes insurance cover for ‘additional risks’ is appropriate. This is unlikely to be an issue in a small repair scenario, but where there is a new build, or extension works, then archaeological insurance may be a wise investment.

In an old city, or even a village or hamlet where there may be layers of mediaeval, Roman or Saxon developments lurking not too far beneath the surface, the contractor is obliged to bring any archaeological finds to the attention of the local authority’s Archaeological Officer. This is frequently a condition of some planning permissions as well. On some sites, if antiquities are suspected, a representative of the local authority may sit in during the excavation of the foundations or slab and examine the spoil excavated to assess if there is anything of value.

If anything of value is found, all works on site may be suspended to allow for a 'dig' and the site to be fully recorded, sometimes with protective measures to preserve the ground for more detailed investigation when the building site is next recycled.

The cost to the development programme could be enormous.