Construction Insurances a practitioner s view. A presentation to the Hong Kong Institute of Surveyors (Quantity Surveying Division)

Transcription

1 Construction Insurances a practitioner s view A presentation to the Hong Kong Institute of Surveyors (Quantity Surveying Division) Presentation on 13 August 2013 By John Lam, Nathan Cheung and Leo Cheung (Jardine Lloyd Thompson Ltd) Distinctive. Choice. A Jardine Matheson Associate Company

2 Opening Remarks Presentation : Approach and Objectives Your interests and concerns (and difficulties on insurance) The disclaimer While we have examined the insurance policies for the particulars which otherwise do not accord with the contract requirements, as quantity surveyors, we are not experts in the legalities of contract insurances. If considered necessary, the Employer may request its specialist advisers in the field to comment on the terms and conditions in the said policies. Vetting insurance policies Some basic concepts/kinds of construction insurances Q&A Time

3 On vetting Vetting against what? Special Conditions to amend the General Conditions Who changed it and why commercial reasons/ risk profile of the project One size fits all? Third Party Liability limit? (Government contracts 10% of Contract Value. Not less than but is not the contractor s maximum liability.) Who are you vetting for? Some basics: - Contract Administration a continuous process. - Expiry vs extension - Documents are there when required - Evidence of premium paid - Principal is an insured party (Joint Name) - Who are excluded? (HKECI policies to exclude Nominated and Specialist Contractors/ Self-employed persons) - In case of doubt, ask.

4 Insurance Contract A Financial contract and financial only That can be enforced at a court of law (avoid will be ) Insurable interest a relationship of financial loss following the happening of an insured event. A contractor s insurable interest Indemnity to the Principal/ Care of Works/Damage to Person and Property/Statutory requirements Indemnity Put you back to a position before the loss ( no gains). Proof of loss. The concept of Sum Insured rebuild costs. The Policy limit. No consequential loss. Format - Operative Clause (the agreement) - Conditions (how) - Exceptions/Exclusions clarify/and reiterate the cover - NOT BACK TO BACK WITH YOUR CONTRACT ( it has a life of its own) - Common Law approach

5 Insurance Contract Basics Accident Loss - Physical loss and Financial Loss Financial Compensation and subject to the policy limit Exceptions Limitations Not answers to all Important tool to project management Cash flow assistance Commercial, social, economic and management functions

6 Common Construction Insurances CONTRACTOR ALL RISKS Project Section I and II Section I material damage to project assets Section II liability to Third Parties Annual policies/bespoke policies (made to order) Government contract wording word by word, clause by clause specimen wording Multiple insureds Excesses

7 Common Construction Insurances EMPLOYEES COMPENSATION INSURANCE The Ordinance The Main Contractor s insurance obligations Authorized insurers Joint Name HKD200,000,000 Market conditions (and difficulties)

8 Common Construction Insurances PROFESSIONAL INDEMNITY INSURANCE Not an accident/damage policy Insurance for failure of professional duties (for Government contracts it is normally for design errors) that result in financial loss to the Principal Some years after practical completion Liability at law common law Commonly required by Government projects

9 Common Construction Insurances CONTRACTOR PLANT AND EQUIPMENT Normally for the owner to arrange Can be an item of the Contractor All Risks policy Can be the subject of a separate policy New replacement value BONDS Performance Bonds Not insurance Contractors increasingly use insurers as an alternative source for bonds

10 Q&A Thank you please ask questions.