Download - Jardine Lloyd Thompson Ltd
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Jardine Lloyd Thompson Ltd
Construction and Professional Indemnity Insurance
Understanding The Issues
Andrew Harrison-SleapPhone: 0207 528 4711
E-mail: [email protected] April 2008
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Agenda
What Does PI Cover?
Drivers For Purchasing PI
PI Coverage Strategies
Links with Other Policies
Claims Examples
Factors Affecting PI Premiums
PI Contractual Considerations
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What Does PI Cover?
Indemnity for claims made during the period of
insurance as a consequence of professional
acts, errors or omissions
First party costs incurred prior to handover to
mitigate matters that would have otherwise
given rise to a claim
Includes coverage for liabilities due to a sub-
contractors professional activities
Defence costs
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Only Professional Activities conducted after the Retroactive
Date and before the Discovery Period are covered
Feasibility / Front End Design Design & Construct Defects Liability Run off / Discovery Period
Retroactive Date
1/04
Policy Start Date
1/05
Practical Completion
1/08
Final Completion
1/09
Policy End Date
1/15
Note: Policy will only cover claims made during the policy period (including Discovery Period). Maximum Policy Period 10 years
Project PI Time Line
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Who are Professionals?
University qualification
Industry bodies (Association of engineers)
Examples: Architects, Engineers, Quantity Surveyors, Surveyors, Project Managers
Not included: Workmanship, Manual Labour
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Covered Contractor Activities
Feasibility studies Front end designs Detailed designs Technical information calculation Geotechnical studies Project management Surveying (Quantity and Land) Procurement management
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Covered Liabilities
Rectification costs (including first party prior to handover)
Consequential losses (Profits / Revenue/LDs)
Third party bodily injury and property damage (Only consultants not contractors)
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Drivers For Purchasing PI
Client requirements Financiers requirements Balance sheet protection Part of good corporate governance (risk
management)
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Types of Cover
Annual policy covering all claims made for all projects of the Insured
Single project policy (Multi year – 10 years max)
Single project annual
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Third Party Liability Insurance
Liabilities for:– Third party property damage– Third party bodily injury– Obstruction, loss of amenities, trespass, nuisance,
interference, denial of access or any like cause
Occurrence based policy Period: Works and Defects Liability Completed operations coverage
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Links With PI – Third Party Liability
Third party liability covers liability for third party property damage and bodily injury only
Excludes professional services coverage for consultants (fee only work)
Only covers professional risks of contracting activities
Does not cover defective works
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CAR Insurance
Insures physical loss or damage to works First party policy (not a liability policy) Period – Works and Maintenance
– Visits coverage– Limited/Extended maintenance (On site only)– Full guarantee maintenance
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CAR Insurance – Defects Coverage
DE5 – Covers all damages except betterment of defective part
DE4 – Excludes defective component part DE3 – Excludes defective property DE2 – Excludes defective property and that which
relies upon it for support DE1 – Total exclusion for defective design, plan,
specification, materials or workmanship
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Links With PI – CAR
CAR covers defects but only where there is physical damage to the works
CAR only provides coverage during the construction and defects liability period (must have guaranteed maintenance cover)
CAR does not cover consequential losses (LDs)
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PI Claims
Design and Build Shopping Centre Car park
Subbed D&B to third party contractor ECV: GBP 6m Defective design of expansion joints Cracking of car park Demolition and Rebuild Consequential Loss (Loss of trade) Subcontractor Capped Liability
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CAR Claim Example 1
A building has a structural defect in one wall which causes an entire building to collapse– Covered by CAR during construction and
maintenance period– Not covered if damage after maintenance
period. Covered by PI if the Insured is liable – Consequential losses not covered. Covered
by PI if the Insured is liable
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CAR Claim Example 2
A building has a structural defect in a wall which causes damage in that wall only. The rest of the building has structural defects but theses other parts of the structure are not damaged– Damaged wall covered by CAR during construction and
maintenance period– Not covered if damage after maintenance period.
Covered by PI if the Insured is liable.– Rectification of other structural defects (not damaged) not
covered. Covered by PI if the Insured is liable – Consequential losses not covered. Covered by PI if the
Insured is liable
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Factors Affecting PI Premium
Relationship with underwriter Claims record Type of work Type of project (Construction, EPC / D&B,
FEED) Contract value / Fees Territory Experience Risk Management Programme Structure
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Contractual PI Insurance Requirements
Requirement to maintain coverage (12 years) Available at commercially acceptable terms Provide certificates of insurance / to whom it
may concern letters – Not policy Limits of liability (GBP 10m aggregate) Not any one claim coverage. Agg limit Principal not insured Annual coverage preferable
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Thank you!
Questions?