Construction Insurance
Liabilities across the construction industry are as diverse as the insurance companies and underwriters that serve it. From project start to finish, construction contractors must confront complex, often large-scale risks. We offer a comprehensive approach to developing clients’ programmes, from underwriting to loss control and claims management.
Key types of insurance on construction projects
We focuses here on six common types of insurance, often considered when parties carry out a construction or engineering project:
All Risks Insurance covers physical damage to the works and site materials. It may be taken out by the contractor or the employer, and the parties should specify who is responsible in the construction or engineering contract. The contract usually details the specific insurance requirements, for example, which risks must be insured against and the amount of insurance. Whichever party obtains the insurance, the contract often requires it to be maintained in the joint names of the employer and the contractor.
Professional Indemnity Insurance insures against liability arising from professional negligence. This usually includes a contractual liability that is equivalent to professional negligence, such as a breach of a contractual obligation to exercise reasonable skill, care and diligence when carrying out design. Architects, engineers, other professional consultants and a building contractor that owes a design responsibility to its employer are usually required to maintain such insurance.
Product Liability Insurance protects against liability for injury to people or damage to property, arising out of products supplied by a business. Suppliers of equipment to a construction or engineering project, such as lifts or escalators, may be required to maintain such insurance, sometimes in place of professional indemnity insurance.
Public Liability Insurance covers liability arising from death or personal injury to third parties other than the insured’s own employees and for damage to property belonging to third parties.
Latent Defects Insurance (also known as decennial insurance) typically lasts for ten years from the original construction of a building. A building owner must usually arrange the cover in advance and it typically protects the owner against the cost of remedying the structure of a building, due to a defect.
Does a contract’s level of insurance cap liability?
Simply referring to a required level of insurance in a contract does not cap liability at that level. This is a common misconception in the construction and engineering industry.
For example, if an architect is contractually required to maintain professional indemnity insurance of £5 million on an “each and every claim” basis, this does not automatically limit its liability to £5 million for each and every claim. If the architect’s client has a claim for £10 million, the architect’s own assets may be at risk. The architect and its client may agree a separate cap on liability (at the same level as the insurance requirement), but the insurance requirement alone does not create a cap.
Employer's Liability Insurance. Employers are responsible for the health and safety of their employees while they are at work. Employers’ liability insurance will enable you to meet the cost of compensation for your employees’ injuries or illness whether they are caused on or off site. However, any injuries and illness relating to motor accidents that occur while your employees are working for you may be covered separately by your motor insurance. Employers Liability insurance is a statutory requirement.
Key types of insurance on construction projects
We focuses here on six common types of insurance, often considered when parties carry out a construction or engineering project:
- All risks insurance.
- Professional indemnity insurance.
- Product liability insurance.
- Public liability insurance.
- Latent Defects Insurance
- All risks insurance
- Employers Liability
All Risks Insurance covers physical damage to the works and site materials. It may be taken out by the contractor or the employer, and the parties should specify who is responsible in the construction or engineering contract. The contract usually details the specific insurance requirements, for example, which risks must be insured against and the amount of insurance. Whichever party obtains the insurance, the contract often requires it to be maintained in the joint names of the employer and the contractor.
Professional Indemnity Insurance insures against liability arising from professional negligence. This usually includes a contractual liability that is equivalent to professional negligence, such as a breach of a contractual obligation to exercise reasonable skill, care and diligence when carrying out design. Architects, engineers, other professional consultants and a building contractor that owes a design responsibility to its employer are usually required to maintain such insurance.
Product Liability Insurance protects against liability for injury to people or damage to property, arising out of products supplied by a business. Suppliers of equipment to a construction or engineering project, such as lifts or escalators, may be required to maintain such insurance, sometimes in place of professional indemnity insurance.
Public Liability Insurance covers liability arising from death or personal injury to third parties other than the insured’s own employees and for damage to property belonging to third parties.
Latent Defects Insurance (also known as decennial insurance) typically lasts for ten years from the original construction of a building. A building owner must usually arrange the cover in advance and it typically protects the owner against the cost of remedying the structure of a building, due to a defect.
Does a contract’s level of insurance cap liability?
Simply referring to a required level of insurance in a contract does not cap liability at that level. This is a common misconception in the construction and engineering industry.
For example, if an architect is contractually required to maintain professional indemnity insurance of £5 million on an “each and every claim” basis, this does not automatically limit its liability to £5 million for each and every claim. If the architect’s client has a claim for £10 million, the architect’s own assets may be at risk. The architect and its client may agree a separate cap on liability (at the same level as the insurance requirement), but the insurance requirement alone does not create a cap.
Employer's Liability Insurance. Employers are responsible for the health and safety of their employees while they are at work. Employers’ liability insurance will enable you to meet the cost of compensation for your employees’ injuries or illness whether they are caused on or off site. However, any injuries and illness relating to motor accidents that occur while your employees are working for you may be covered separately by your motor insurance. Employers Liability insurance is a statutory requirement.