Project Commercial Management Procedure for Insurance Policies

1.0 Purpose of Procedure

To ensure that:

All aspects of project insurances are appropriately arranged and administered to protect the Company’s best interests and to meet acceptable risk profile including (but not limited to) Construction All Risk (CAR), Third Party Public Liability (TPL), Professional Indemnity (PI) and Difference In Conditions (DIC) policies where appropriate.

Subcontractors, major suppliers and consultants hold appropriate insurance cover, in relation to all project insurance matters, including motor vehicles, plant and contractor’s equipment, off-site third party liability and workers compensation.

Interfaces with Insurance Brokers, Insurers, Loss Adjusters and Client Representatives are appropriately managed in respect of all insurance matters.

All  insurance  claims  are  adequately  recorded,  reported  and  notified  in  a  timely, complete and comprehensive manner and that records are kept to support claims in order to obtain appropriate recompense within an acceptable time frame.

2.0 Scope

This procedure is applicable for all company Projects Insurances. This procedure contains elements which involve the role of senior positions of company personnel that may operate above and external to the Project Team.

3.0 References

Questionnaire & Proposal for CAR Insurance

Schedule of Supplementary Information – General

Supplementary Information/Questionnaire – Wet Works

Sample Project Insurance Register

4.0 Definitions and Abbreviations

Contractor’s Construction All Risks Policy (Contractor’s CAR): A policy procured by the company generally covering „All Risks‟ of physical loss or damage to the Permanent Works, Materials and Plant supplied for permanent incorporation into the Works, including extended Maintenance Cover during the Defects Notification Period that complies with project specific requirements, law and company requirements.

Difference in Conditions Policy (DIC): A policy taken out by the Company where unacceptable a policy taken out by COMPANY where unacceptable shortfalls are identified in the Employer provided policies. (Note: the existence of a DIC policy must not be intentionally disclosed to anyone without the express approval of the Corporate Commercial Department (CCD).

Employers Construction All Risks Policy (Employer’s CAR): A Policy provided by the Employer generally covering „All Risks‟ of physical loss or damage to the Permanent Works, Materials and Plant supplied for permanent incorporation into the Works, including extended Maintenance Cover during the Defects Notification Period that complies with project specific requirements, law and company requirements.

Insurance Broker: An organization that procures insurance cover on behalf of the Company from various insurers and receives advice on claims.

Insurer: A party to an insurance contract who undertakes to indemnify the Company for certain predefined losses.

Loss Adjuster: A party appointed by the Insurers to report on the validity and appropriate value of an insurance claim Professional Indemnity Policy (PI) A policy taken out by the Company or our consultants where the contract involves any type of “professional activities‟, for example, the taking on of design liability (either directly or indirectly) or the provision of Project/Construction Management services by or on behalf of the Company.

Third Party Public Liability (TPL): A policy procured either by the Company or the Employer generally covering legal liability to third parties for any loss or damage to property, death or personal injury which arises out of on-site activities in connection with the Project.

Wetworks: Project   works   that   are   to   be   carried   out   in   close proximity/adjacent to open water e.g. river, canal, lake, sea etc.

TOC: Taking over certificate.

5.0 Responsibilities

The following personnel have responsibilities mentioned in this procedure:

  • Project Director (PD)
  • Project Commercial Manager (PCM)
  • Divisional Commercial Manager (DCM)
  • Corporate Commercial Director (CCD)
  • Corporate Commercial Manager – Contract (CCMC)

6.0 Insurance Procedure

6.1 Tender/Procurement Stage

a) Generally, allowances for insurance in tenders and negotiated prospects will be based on indicative % values for the types of insurance required.

b) During the tender or negotiation phase of a project, the DCM/CCD shall liaise with the CCD regarding insurance requirements and provide details of actual or likely insurance requirements.

c) Where the prospective Employer is to provide the insurances and the Risk of Loss rests with the Contractor, the Company should always strive to limit its obligations for Risk of Loss to the extent recoverable from the insurance arranged by the Employ

d) The DCM /PCM must liaise with the EM to obtain a copy of the proposed Employer insurances in these circumstances and provide a copy to the CCD for review and commen

e) The DCM/PCM will ensure that any comment/advice from the CCD with regard to insurance matters is appropriately addressed and taken in to account in the tender/negotiation process.

f) The DCM/PCM will highlight any specific requirement for PI or DIC cover and/or any perceived inadequacy in insurance cover where it is proposed that insurances are to be provided by the Employ

g) The DCM /PCM will advise and involve the CCD again where it appears likely that a tender or negotiated prospect may result in a formal award of contract

6.2 Placing of Insurance

6.2.1 Insurances by Contractor

a) Once a project requiring Contractor Construction All Risk (CAR) and/or Third Party Liability (TPL) insurances is awarded, the Project Commercial Manager (PCM) shall request placement of those insurances via the CCD and ensure these are in place prior to the commencement of any works on site

b) The PCM shall provide completed construction questionnaires/documentation as applicable

These include:

i. Questionnaire & Proposal for CAR InsuranceProject Commercial Management Procedure for Insurance Policies

ii. Schedule of Supplementary Information – General

iii. Supplementary  Information/Questionnaire  –  Wet  Works  (if applicable).

c) Projects must act quickly in the provision of the necessary information in order to allow sufficient time for an adequate response

d) The Sum Insured must include:

i. the full value of the contract works as a minimum plus any specified overrun, temporary works, formwork, scaffolding, props and the like, contract consumables and all other materials including:

  • principal supplied materials and equipment;
  • employee’s effects; and
  • any work of reconstruction, rectification or repair of any of the above insured property

ii. the value of existing structures and improvements including designated heritage buildings and ancillary structures and all other structures and improvements intended to be maintained and all other materials including: –

principal supplied materials and equipment; and

any work of reconstruction, rectification or repair of any of the above insured property.

iii. Policies should also include:

  • To cover contract all risks from start to Taking Over Certificate, when risk of loss passes to Employer
  • CAR cover must be extended if Taking Over Certificate is delayed; associated costs to be included in prolongation claims
  • Named Insured’s to be Employer, Contractor and Subcontractors; if Employer’s financers are to be named then the background to this should be clarified
  • Company to be specified as “Loss Payee” as we typically incur costs in first instance given that risk of loss rests with us prior to TOC
  • The Third Party Liability coverage must also be extended to reflect with the Defects Liability Period in contract.

iv. Any other material changes should be brought to attention of CCD, prior to advising insurers

v. Any requirement for Professional Indemnity (PI) or Difference in Conditions (DIC) policies must be made via the CCD.

6.2.2 Insurances by Employer

a) When the Owner procures the insurances (particularly the CAR policy) and the Risk of Loss rests with the Contractor, the Company should always strive to limit its obligations for Risk of Loss to the extent recoverable from the insurance arranged by the Owner.

b) Projects are to check Employer policy against the wording provided at tender stage for any differences

c) CCD to further review Employer policy to identify any shortfall in standard wording, and to recommend action as necessary

d) The general requirements for Employer policies are as noted above (see 6.2.1)

e) The PCM must obtain a copy of the Employer’s insurances PRIOR to commencing any works on site and immediately provide this to the DCM and CCD for comparison with that indicated at Tender stage and/or included in the Main Contract Documents.

f) If COMPANY take out specialist DIC cover, then this not to be disclosed to the Employer and/or Engineer/original insurers

6.2.3 Subcontractor Insurances

a) CM’s shall ensure that Subcontractors, Suppliers and Consultants procure and maintain all insurances specified in their respective contracts, and maintain a file/schedule evidencing compliance and currency of the necessary insurances, for example:

i. Workers Compensation Insurance – generally a policy issued on an annual basis for all employees. The number of employees is generally stated, PCM to check that this is consistent with reality.

ii. Contractor’s Plant and Machinery Insurance – generally a policy issued on an annual basis covering all subcontractor’s plant and equipment The policy may be limited to specific plant, in which case the PCM is to ensure that only listed plant is brought onto the project site, or else ensure that the subcontractor procures an updated or additional policy to include any additional plant purchased for the project.

iii.     Motor Insurance – for the subcontractor’s road-going vehicles entering onto site.

iv. Public Liability Insurance – must have an indicative value of not less than USD 1 million and have the Company and the Employer as additional insured parties.

b) Subcontracts, Supply Agreements and Consultant Agreements should clearly state who is responsible for payment of the deductible/excess under any policy – g. the party responsible for the event.

6.3 Updating of Insurances

a) DCM /PCM shall maintain a register of all insurances on Project Insurance Register and prepare a Quarterly Report reviewing the status of the Project insurances currently in effect and provide a copy of this Report to the CCD. This report shall include for each project:

i. Anticipated TOC date

ii. Estimated final value at completion due to client changes iii. Estimated escalation costs

iv. Estimated replacement costs at that Quarter

v. Any specific action that is required or likely to be required in the coming Quarter

b) DCM/PCM will review the Report with CCD and increase values insured as deemed appropriate

c) The DCM/PCM shall also advise CCD if there is any material change in circumstances on the Project that might affect insurance cover, CCD will then review and action as appropriate.

6.4 Incident Notification and Claims

6.4.1 Notification and Initial Actions

a) PCM shall immediately advise DCM and CCD in the event of a claim or occurrence likely to give rise to a claim.

b) CCD and the DCM shall review the initial report and advise underwriters of a potential claim.

c) PCM within 24 hours of initial notification shall provide further details and an estimate of costs, supported by a police report where appropriate, to the CCD and DC

d) DCM shall review the relevant Main Contract/Subcontract details and advise the CCD of any particular contract requirement or obligation relating to the event/claim in question.

e) The Company employees must not admit liability for any incident or give or sign any statements without approval from the DGM /GM.

f) DCM/CCD will accompany the Loss Adjuster to site as soon as possible after the event has been reported and together with the PCM they will inspect the damage relating to the even

g) CM is to provide details of all possible claimants and any other party involved in an insurance incident and details of any key witnesses (eg. name and address, contact details).

h) CM is to provide an initial estimate of the extent of claim to the CCD and the DCM.

6.4.2 Preparation and Settlement of Claims

a) PCM must maintain accurate records of all plant, labor, materials, subcontractors and consultant expenditure related to an insurance incident, including time sheets, diary notes, delivery dockets and invoices, and prepare a draft claim at the earliest opportunity.

b) DCM and CCD will review PCM’s draft claim prior to issue to Loss Adjuster/Underwriters and establish whether the claim is valid in accordance with the policy and ensure that all insured items have been included.

c) DCM and CCD will direct, advise and assist the PCM in any negotiations and dealings with the Loss Adjusters.

d) Whenever possible, the Loss Adjuster’s recommendations are to be endorsed by CCD prior to further issue to Underwriters.

e) Any shortfall between the cost of any insurance incident and the claim payout shall be borne by the project where the incident occurred.

6.5 Terminating Insurances

6.5.1 Insurances by Contractor

PCM shall forward copies of Taking-Over Certificates (TOC) to the DCM/CCD when received.

DCM /CCD shall verify validity of the TOC and advise the CCD accordingly.

CCD will notify the Brokers upon receipt of an authenticated TOC in order that the Company may be relieved of its Risk of Loss obligation.

Where backdated TOC’s are received months after their effective date, the CCD shall establish whether the Defect Rectifications cover is to be extended and advise the CCMC and DCM of additional costs for such extension.

No defects work should be completed beyond the original Defects Liability Period unless evidence of insurance has been received extending the Maintenance Period to cover these remaining defects works.

DCM’s /PCM shall be responsible for following up the earliest issue of Defects Liability Certificates (DLC) and shall forward these to the CCMC /CCD once received.

DCM/PCM shall verify validity of DLC and advise CCD accordingly.

6.5.2 Insurances by Employer

Where clients are responsible for providing insurances and belated issue of the TOC means that Defects Rectification cover has almost certainly expired, the PD shall NOT enter onto the owner’s site for  the  purposes of  attending to  defects  without the  owner having provided evidence  of extended defects rectification cover.

7.0 Related Records

Questionnaire & Proposal for CAR Insurance

Schedule of Supplementary Information – General

Supplementary Information/Questionnaire – Wet Works

Project Insurance Register