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When you tender for bids for construction projects, contractors are normally
asked to arrange insurance cover for the works and their own liabilities.
There are a number of disadvantages for you as the owner:
·
You must check that the contractor’s policies note your interest
·
Most contractors arrange an annual policy with a specific contract limit.
If the value of your contract exceeds this limit, then separate
arrangements should be made by the contractor. In addition, the contract
may extend across two periods of insurance and the contractor’s cover may
change during the life of the contract
·
With sub-contractors and others arranging their own insurance, there will
be several policies covering the same contract, possibly leading to
overlaps and gaps in cover. This can also cause delays in settling
claims, where there may be disputes between insurers over cause and
responsibility
·
Premium charged may include a ‘profit margin’
·
As the owner, you must still arrange insurance to cover your own
liabilities, even although you will be named on the contractor’s policies
·
Claim settlements are paid to the contractor – not to you as the owner
OWNER CONTROLLED INSURANCE PROGRAMME
As an option to the traditional Contractor Controlled Insurance Programme,
it is now accepted practice that the Owner should arrange insurance
protection. The benefits of going down this route are that you:
·
Control the policy and are not governed by the contractor’s insurance
cover
·
Place the insurance with one insurer, thus avoiding duplication of effort
and potentially improve policy terms
·
Include all contractors on your policy, avoiding potential disputes
between insurers
·
Choose the sum insured and can amend it to reflect changes in the project
·
Select the level of self-insurance (deductible)
·
Reduce premium cost
·
Have control of claim monies, ensuring they are used to reinstate the work
This is a viable alternative to traditional arrangement of insurance for
construction projects.
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