Construction insurance provisions

For the construction practitioner, insurance represents one of the most difficult and potentially dangerous areas on which they may be called to advise a client. Few construction practitioners understand the subject in sufficient depth and breadth to advise without external specialist assistance. Many do understand the limits of their own knowledge and will not advise on insurance matters without first seeking specialist advice themselves or advising their clients to do so. Others jump in, unaware of the pitfalls, and suffer the consequences.

The case of Pozzolanic Lytag Ltd v Bryan Hobson Associates served to highlight the dangers of a construction practitioner taking on responsibility for insurance matters, even inadvertently.

To protect against these risks, construction practitioners should:

• include a specific exclusion with regard to advising on insurance in their terms of appointment;
• never advise on insurance without qualifying that advice to the extent that it should be verified by an appropriately qualified and regulated specialist;
• never advise on how much insurance should be effected or what level of uninsured excess is appropriate. It is appropriate to advise on the risks and potential financial consequences, but a construction practitioner is rarely in a position to advise a client on the extent to which that risk should be insured.