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contractors-insuranceThis information is provided as a response to a number of questions raised by a concerned contractor regarding the responsibilities of clients for insurance whilst works are being undertaken so what are the contractor and client insurance responsibilities during works?

The general principal is that each party is responsible for liabilities arising from their own actions and for the safety and upkeep of their own property.

However, this general principal can amended by contract or some other agreement. With the best will in the world, things go wrong from time and when they do it is important that they are remedied as quickly as possible to everyone’s satisfaction. Adequate insurance is a key factor in ensuring that unforeseen situations that result in loss, damage or liability are remedied quickly and efficiently by providing certainty that finance is available at the time it is required and a claims handling service with expertise across all aspects of the claims process. For any person or business it is essential that the correct and adequate insurance is in place, and that the insurer has a full understanding of the risk being covered and that changes to the risk are advised to the insurer on an ongoing basis in order to avoid the disappointment of a claim not being paid unexpectedly.

What are the contractors responsibilities on site?

In the circumstances of a contractor working on a third party site, whether this is on domestic or commercial premises, it is in the interests of all parties to ensure that the risks or responsibilities arising from the work are established prior to commencement and that suitable and adequate insurances are in place. The responsibilities of each party can be governed by contract, typically JCT for building works, but common law responsibilities will apply to each party in the absence of a formal contract.

In a building contract, the responsibility for arranging adequate insurance tends to focus on the contractor. This is because the obvious risks are those of injury to employees and third parties arising from the work and loss or damage to the site works, materials and plant which are or can be covered by the contractor’s Employers Liability, Public Liability and Contractors ‘All Risks’ insurances.

However, the contractor is not the only party exposed to risk. The client or property owner has responsibilities to others and an interest in the safety and security of their own property. The client or property owner needs to ensure that they have adequate insurance to cover their own liabilities and loss or damage to any existing structures or property being worked in or on. If there is an existing policy, it is essential the insurer is advised of works to be undertaken as this may be viewed as an enhanced risk and additional premium and/or restrictive policy terms applied. The insurer will also need to be made aware of any breaches to existing policy conditions, e.g. the non-operation of an alarm or sprinkler system for a period as a result of the work. If there is not an existing policy, it is possible to arrange specific cover.

Responsibilities of professionals

Any professionals used in a contract should also have adequate insurance to cover their risks, in particular professional indemnity. Details of the professional indemnity need to be checked very carefully to ensure adequacy as there is no standard form of cover or limit, many policies have a very low limit (£100,000 or less) that applies on an annual aggregate basis, i.e. the insurer will not pay more than the policy limit in all in the policy period irrespective of the number of claims. Therefore, the insurance situation is more complex than may be initially envisaged. It is worth spending the time to ensure that all parties know what their responsibilities are and ensuring that each party has the matching insurance.

Have any queries on this, please feel free to get in touch.