4 IDCsr project insurance

conditions

Traditional procurement and management systems dictate that contractors take

out an overall insurance policy or policies to cover each and every project, join-
ing in the client as necessary. This is backed up and replicated many times by
the contractor’s, their supply chains and consultant’s individual policies, which
tends to create adversarial responses if things go wrong.
Much work has been carried out under the Government Construction Strategy
2011 in developing new models of procurement that enable early engagement
of the whole team including key members of the supply chain, facilitating inte-
grative collaborative working with the use of Integrated Project Insurance (IPI).
The IDCsr system represents the final step to complete integration of the design
and construction process, where a single legal entity takes full responsibility for
both process and end product under a product sale form of agreement.
This has enabled the same insurance brokers who have supported these
Cabinet Office initiatives to devise a similar product specifically for IDCsr,
called IDCsr Project Insurance (IDCPI). One of the IDCsr Sale Agreement’s
model conditions is the use of IDCPI on all IDCsr projects.
The IDCPI product will provide the following cover:

1. Construction phase
a. IDCC controlled project insurance covering material damage to the
works plus (non-professional indemnity) liabilities to third parties
arising from the works.
b. Financial losses consequent upon the damage set out in 1(a) including
additional costs of construction, loss of profit, loss of rental income and
so on.
c. Project-specific Professional Indemnity insurance covering defective
design, specification and advice.
d. The ‘Insured’ would encompass the client plus all practitioners within
4 IDCsr project insurance conditions

the IDCC with a full waiver of subrogation rights.

2. Post-completion cover
a. Latent defects insurance (including component failure) for a period of
12 years from completion.
b. The definition of ‘Insured’ for the purposes of this cover would be as
per 1(d) plus any building owners/funders/tenants as appropriate.

Integrated Design & Construction – Single Responsibility: A Code of Practice, First Edition. Colin Harding.
© 2015 John Wiley & Sons, Ltd. Published 2015 by John Wiley & Sons, Ltd.

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 Integrated Design & Construction – Single Responsibility

The levels of premium will be driven by the specifics of each project together
with the make up of the IDCC teams that work within them. As a general rule, the
smaller the contract, the more expensive (relatively) the premium will be. It is
expected that a benchmark of IDCPI premium cost will be 2.5% of project value.
It is recommended that prospective IDCCs contact their insurance brokers to
set up an IDCPI facility. Then, early in the bidding stage, ask the brokers to
confirm that cover will be available for that particular project team and once
the concept designs have been finalised to confirm the premium. See Stage 2.3.
Premiums will be disclosed within the Stage 2 Bid to enable the Client to decide
with the preferred IDCC whether to invest in IDCPI cover. If it is decided not to
take IDCPI cover, then both Client and the IDCC Team will need to fall back on
their traditional Design and Build/Contractors All Risks insurance policies.
However, it is expected that as the IDCsr system becomes established and more
widely used, premiums will gradually fall, and at that stage, IDCPI will become
mandatory on all IDCsr projects.

Reference: www.griffithsandarmour.com/linkedin
4 IDCsr project insurance conditions

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