Construction insurance provisions

Checking the validity of policies

Unless project specific policies are put in place, most insurance policies are written on an annually renewable basis. The construction practitioner therefore needs to urge their client to ensure that the validity and adequacy of the initial policy(ies) is checked carefully and that such checks continue at each renewal  of said policy(ies). This ensures continuity and that any significant changes to the scope of cover and the conditions applicable are highlighted to the employer. This checking process should continue for the entire period of the liability – up to 12 years for professional indemnity (PI) insurance policies.

Checking the scope of policies

When checking the adequacy and scope of insurance policies, particular attention should be given to ensuring that they meet the contractual obligations as well as to the applicable policy exclusions, conditions and excesses. Some aspects of cover that insurers may consider as being particularly high-risk may be the subject of limits of indemnity that are 'in the aggregate'. This may be true, even on policies where the main limits are on an 'each and every claim' or an ‘any one occurrence’ basis. Examples of this may be claims arising out of environmental damage or contamination, products liability, etc. under a public liability policy.

Policy extension endorsements or additional, supplementary cover may be necessary for exclusions that the client does not wish to accept. This will generally involve additional premium(s).

Claiming against insurance policies

When claiming against insurance policies it is necessary for the insured party to demonstrate both that it has incurred a loss as a direct result of the insured event and that the loss has been reasonably incurred. It is particularly important to remember this principle when settling a number of claims, some of which may relate to insured events and some of which may not.