Construction Insurance Basics
Key concepts:
- Cover - what the insurance policy pays for
- Exclusions - what the insurance policy does NOT pay for
- Damage - physical damage that has already occured or is imminent
- Defect - workmanship or design error that can result in damage
Not all defects and damage are created equal.
Defect clauses - LEG (London Engineering Group)
LEG 1/96 - outright exclusion (i.e. does not cover defects)
LEG 2/96 - excludes cover to the defective part, but covers damage to the non-defective parts (i.e. covers repairs to the flaw, but not the flaw itself)
LEG 3/06 - covers the defect, the resulting damage, but does not cover improvements to the design that caused the original defect to occur (i.e. all costs to reinstate as originally designed)
External links
Construction All Risk - CAR
Covers the insured (i.e. Client/Contractor) for:
Fire damage during construction;
Water damage (flood, escape of water) during construction;
Physical damage (collapses, plant overturning etc);
Defects (during construction) etc
Third Party Liablity - TPL
Covers the insured (i.e. Client/Contractor) for:
Impact on neighbouring properties;
Third party and employee H&S incidents;
Damage to public domain etc
Property Insurance
Covers the insured (i.e. Client/Tenant) for:
Damage due to external events (fire, flood, storm, accidental damage) after practical completion;
Does not cover damage due to inherent defects!
Articles
Design Life vs Structural Age
Basement Waterproofing
Latent / Inherent Defect Insurance - LDI/IDI
Covers the insured (i.e. Client, Tenant) for:
Defects leading to damage due to either design or workmanship issues;
Water ingress (basements/envelope) due to design or workmanship issues;
Cladding defects leading to deterioration or water ingress;
Professional Indemnity - PI
Covers designers - architects, engineers for:
Inadequate design or detailing;
Underestimation of forces (action safety factors);
Overestimation of strength (material safety factors) etc
This is a FREE 18-page presentation covering an introduction to construction insurance, specifically CAR - Construction All Risk and LDI - Latent Defect Insurance type policies, highlighting key hazards and considerations.
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