INSURANCE IN THE

CONSTRUCTION INDUSTRY

Dr Daniel Brawn
Wednesday 9 December 2015
Discussion Points for today

 What is Insurance?

 Insurance under FIDIC Contracts

 Professional Indemnity Insurance

 Other Common Insurance

WHAT IS INSURANCE?

Contract of indemnity, the insurer promises to pay if an

insured event occurs, insurance is not “fault” based

May cover the building works, plant, equipment and

materials, damage or injury to workers or third parties

Contractor usually insures new-build works, Employer

insures an existing property (extensions, refurbishment)

The contractor includes the cost of insurance in his

tender sum
INSURANCE PROVISIONS

 Contractor’s All Risk policy (“CAR”)

 Joint names, contractor and employer

 Sub-Contractors

 Subrogation

 Project Insurance

 “Tail” coverage
 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 18.1
 The party required to obtain insurance is the “insuring Party”.

 If Contractor is the insuring party, the insurer and the terms of

the policy must be approved by the Employer

 If there are joint insured parties, the Contractor acts for the
others except the Employer

 The others are not entitled to receive payment from the policy,
nor to have direct dealings with the insurer

 If the insuring party does not obtain insurance, the other may
 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 18.2
 Insurance for the Works, Plant, Materials, the Contractor’s
Documents and the Contractor’s Equipment.

 Not less than the full reinstatement cost, including demolition,

removal of debris and professional fees and profit

 Unless otherwise stated, the Contractor obtains this insurance,

in joint names with the Employer, for all loss and damage not
listed in Clause 17.3 other than 17.3(c), (g) and (h)

 Provided such cover is available at commercial rates

 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 17.3

• Employer’s Risks

• War, rebellion, riot, explosions, force of nature

• Use or occupation by the Employer of part of

the Works

• Design of any part of the Works by the

Employer
 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 17.4
• If any of the risks in 17.3 cause loss or
damage, the Contractor must rectify it

• Contractor may get an Extension of

Time

• Contractor may get costs, and

reasonable profit for Employer’s design
and occupation of part of the Works
 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 17.1

• The matters for which the Contractor

indemnifies the Employer under Clause
17.1(a) and (b) are insurable under
Clause 18

• The matters for which the Employer

indemnifies the Contractor are matters
for which only the Employer can be liable
 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 18.3
• Loss or damage to property, except
that covered by 18.2, or personal
injury, except that covered by 18.4

• Until issue of the Performance

Certificate

• For the amount stated in Appendix

 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 18.3 CONT

 Unless otherwise stated, the Contractor

obtains this insurance, in joint names
with the Employer

 Cover should extend to all the

Employer’s property, except 18.2
 INSURANCE UNDER FIDIC
CONTRACTS – CLAUSE 18.4
• The Contractor must maintain insurance for
injury to its employees

• This includes the Employer and the Engineer,

except for their own negligence

• This insurance must be maintained for as long

as these personnel are executing Works
 TWO PROBLEMS

• If the Contractor suspends work under

Clause 16.1 for non-payment, that
may include the obligation to insure

• If an insured event occurs, the

Contractor gets the insurance money
to rebuild, but what about an EOT?
PROFESSIONAL INDEMNITY
INSURANCE
 PII covers designers for negligent design

 Under D&B, the Contractor is responsible

 Not usually covered by Works insurance

 Liability may run for 1o or 15 years, therefore “run off” cover

 Article 880 of UAE Civil Code

 PROFESSIONAL INDEMNITY
INSURANCE CONTINUED

• A “Sole Establishment” is personally liable

• “Each and every claim” or “in the

aggregate”

• Limit your liability to your amount of PII

cover

• On a “claims made” basis

 Questions?

www.galadarilaw.com
Dubai DIFC JAFZA Abu Dhabi