UNDERWRITING CRITERIA GENERAL INFORMATION - 1

1
UNDERWRITING CRITERIAGENERAL INFORMATION - 1

• NAME OF PROPOSER
• RELATIONSHIP OF PROPOSER TO PROJECT
• IS THERE A CONTRACTUAL RESPONSIBILITY TO INCLUDE
  THE INTERESTS OF OTHER PARTIES?
• IF SO, NAME THESE PARTIES (SEE NEXT SLIDE)
• LOCATION OF CONTRACT SITE
• DESCRIBE THE CONTRACT SITE TOPOGRAPHY
• RESULTS OF ANY GEOTECHNIC AND HYDROLOGY
  INVESTIGATIONS CARRIED OUT NAME(S) OF ENGINEERS
• DESCRIPTION OF PROJECT
• COPIES OF PLANS, SPECIFICATIONS AND APPLICABLE
  CONTRACT DOCUMENT CLAUSES WOULD BE OF PARTICULAR
  VALUE TO UNDERWRITER
• PARTICULARS OF ANY FREE-ISSUE MATERIALS TO BE
  PROVIDED TO THE CONTRACTOR AND VALUE THEREOF

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CONSTRUCTION HIERACHY
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UNDERWRITING CRITERIAGENERAL INFORMATION - 2

• IS THE PROJECT A TURNKEY PROJECT OR WILL IT BE
  TAKEN OVER IN SECTIONS WHEN COMPLETE
• WILL THE PROJECT BE GIVEN TO ONE CONTRACTOR OR
  WILL IT BE FRAGMENTED IN OTHER WORDS WILL
  SEPARATE CONTRACTS BE AWARDED TO CIVIL,
  STRUCTURAL, ELECTRICAL AND MECHANICAL
  CONTRACTORS
• WILL SITE PREPARATION INVOLVE BUILDINGS
  DEMOLITION
• IF SO, PROVIDE PARTICULARS OF WORK ENTAILED, WITH
  PARTICULAR REFERENCE TO BUILDINGS AND POTENTIALLY
  HAZARDOUS SUBSTANCES THAT MAY HAVE BEEN STORED
• THE OVERALL CONTRACT PERIOD FROMTO
• A BAR CHART SHOWING VARIOUS ACTIVITIES WOULD BE
  BENEFICIAL TO PREMIUM COMPUTATION
• THE FULL CONTRACT VALUE INCLUDING FREE-ISSUE
  MATERIALS
• THE VALUE OF EACH ENGINEERING DISCIPLINE
• THE SECURITY PRECAUTIONS TO BE UNDERTAKEN TO
  PREVENT THEFT, MALICIOUS DAMAGE ETC.

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UNDERWRITING CRITERIA CIVIL WORKS 1

• THE VALUE OF CIVIL WORKS
• ANY SPECIAL PRECAUTIONS TO BE TAKEN IN VIEW OF
  GEOTECHNIC OR HYDROLOGY FINDINGS
• DESCRIBE THE FOUNDATIONS ESPECIALLY WHETHER THEY
  INCLUDE PILES AND THEIR TYPE STRIP, RAFT ETC.
• IS THE POLICY TO PROVIDE FOR PILING, IF SO TYPE
  OF PILES ENVISAGED AND EXPECTED DEPTH OF PILES
• NAME OF PILING CONTRACTOR
• PROVIDE THE DEPTH OF EXCAVATIONS
• TO WHAT EXTENT WILL THERE BE REMOVAL OF SUPPORT
  (LATERAL AND/OR OTHERWISE) TO ADJACENT PROPERTY
  OR BUILDINGS
• IF TEMPORARY AND PERMANENT SUPPORT TO BE
  INSTALLED WHO WILL UNDERTAKE THIS WORK
• NAME THE SUPPORT CONTRACTOR
• WILL THERE BE ANY ON-SITE MANUFACTURE OR CASTING
  OF PRESTRESSED COMPONENTS

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UNDERWRITING CRITERIA CIVIL WORKS 2

• PROXIMITY OF SITE TO SEA OR INLAND WATERWAYS
• IF A RIVER OR DAM PROVIDE THE 50 YEAR FLOOD
  HISTORY, IS THERE A POSSIBILITY OF THE SITE BEING
  FLOODED FROM THIS WATER SOURCE
• DESCRIBE THE PRECAUTIONS TO PREVENT FLOODING
• DEPENDING ON HYDROLOGY REPORT, WHAT PRECAUTIONS
  ARE TO BE TAKEN TO HANDLE THE INGRESS OF WATER,
  FROM AN UNDERGROUND SOURCE
• ALSO, GIVE DETAILS OF STANDBY PUMPING
  ARRANGEMENTS

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UNDERWRITING CRITERIA CIVIL WORKS 3

• IF THE CIVIL WORKS COMPRISES SHAFT SINKING
  TUNNELLING OR OTHER UNDERGROUND WORK THEN
  DESCRIBE
• THE DIAMETER OF THE SHAFT OR TUNNELL,
• THE PROPOSED DEPTH OF THE SHAFT OR LENGTH OF THE
  TUNNELL AND WHETHER THE SHAFT OR TUNNELL WILL BE
  LINED,
• THE PRE-EXCAVATION GROUND INTEGRITY
  INVESTIGATIONS, A COPY OF THE REPORT WOULD BE
  NECESSARY PLUS THE ENGINEERS RECOMMENDATIONS,
• PARTICULARS OF THE METHOD OF PROBING AHEAD OF THE
  WORKING FACE DURING EXCAVATION IS A MUST
• FOR ANY RAISEBORING OR TUNNELL BORING WORK THE
  DIAMETER OF THE RAISEBORE HEAD OR TUNNELL BORING
  HEAD MUST BE GIVEN PLUS DETAILS AS REQUIRED IN
  THE SECOND THIRD AND FOURTH PARAMETER ABOVE.

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PROBING AHEAD OF THE WORKING FACE

• THIS TYPE OF RADIAL DRILLING AHEAD OF THE WORKING
  FACE IS TO IDENTIFY THE NATURE OF THE GROUND
  CONDITIONS AND THE PRESENCE OF WATER
• TO BE EXPECTED AS THE TUNNEL OR SHAFT CONTINUES
• SIDE ELEVATION END ELEVATION
• DRILLING OUTWARDS 30 TO 45 DEGREES FROM THE
  STRAIGHT LINE

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UNDERWRITING CRITERIA STRUCTURAL WORKS

• THE STRUCTURE TO BE DESCRIBED FULLY GIVING
• THE TYPE OF THE STRUCTURE IE. FACTORY, WAREHOUSE,
  OFFICE BLOCK, HOSPITAL OR TENEMENT BUILDING ETC.,
• THE NATURE OF THE STRUCTURE WHETHER IT IS OF
  CONCRETE, WITH BRICK INFILLS OR A BASIC STEEL
  STRUCTURE WITH CONCRETE LANDINGS WITH BRICK
  INFILL ETC.,
• THE NUMBER OF BASEMENTS,
• DETAILS OF ANY PROTOTYPE OR UNTRIED FEATURES
  EMBODIED IN THE DESIGN OF THE STRUCTURE, WHETHER
  STRUCTURAL OR CONSTRUCTION METHOD. IS THE
  SELECTED CONTRACTOR FAMILIAR WITH THIS METHODOGY,
  
• THE NUMBER OF FLOORS,
• THE TYPE OF FINISHES,
• DETAILS WHEN ELECTRICALS AND MECHANICALS WILL BE
  INSTALLED
• DESCRIBE THE MEASURES TO PREVENT THE STRUCTURE
  FROM FLOODING AND WHAT PUMPING ARRANGEMENTS WILL
  BE PRESENT TO HANDLE THE INGRESS OF WATER.

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UNDERWRITING CRITERIA ELECTRICAL MECHANICAL
WORKS

• DESCRIBE THE ELECTRICALS AND MECHANICALS TO BE
  INCORPORATED INTO THE WORKS IE BOILERS, POWER
  SUPPLY TRANSFORMERS AND SWITCHGEAR, AIR
  CONDITIONING AND/OR MANUFACTURING MACHINERY EG TO
  MANUFACTURE WIDGETS
• WHETHER THERE ARE ANY UNTRIED FEATURES OR
  PROTOTYPES OR WHETHER THE MACHINERY IS STANDARD
  OF THE SAME TYPE AND SIZE CURRENTLY OPERATING IN
  MANY FACTORIES
• GIVE PARTICULARS OF THE INSTALLATION PROCESS AND
  TESTING METHODS
• WILL PARTS OF THE MACHINERY BE TAKEN INTO
  OPERATION BEFORE THE PLANT AS A WHOLE IS
  COMMISSIONED, IN OTHER WORDS WILL THERE BE
  BENEFICIAL USE BEFORE TAKE-OVER, IF SO, MUST
  INSURANCE CONTINUE AFTER BEING TAKEN INTO USE? IS
  COVER TO INCLUDE ELECTRICAL AND MECHANICAL
  BREAKDOWN?
• IS THE FEEDSTOCK INFLAMABLE OR IS THERE AN
  EXPLOSION HAZARD
• DESCRIBE THE TESTING PROCEDURE PARTICULARLY THE
  RUNNING TEST AND SAFETY PRECAUTIONS DURING TESTING

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WHAT DETERMINES A PROTOTYPEOR UNTRIED FEATURE

• The cylinder on the left is the standard cylinder
  that has been manufactured for many years and has
  stood the test of time. All that has been done
  to manufacture the cylinder on the right is to
  increase size, otherwise, everything else is the
  same, thus it is a prototype with untried
  features. Accordingly, the stresses and strains
  will be multiples of the original.
• In other words a failure waiting
• to happen.

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UNDERWRITING CRITERIAMAINTENANCE PERIOD

• GIVE DETAILS OF THE MAINTENANCE REQUIREMENTS OF
  THE CONTRACT, DOES THE CONTRACT CALL FOR
• MAINTENANCE VISITS ONLY,
• LIMITED MAINTENANCE PROVIDING FOR DAMAGE
  CONSEQUENT ON PRIOR DEFECTS OF MATERIALS,
  WORKMANSHIP, DESIGN PLAN OR SPECIFICATION
  OCCURRING DURING CONSTRUCTION AT THE CONTRACT
  SITE,
• WIDER FORM OF MAINTENANCE ALLOWING FOR DAMAGE
  RESULTING FROM ALL PRIOR DEFECTS OF MATERIALS,
  WORKMANSHIP, DESIGN PLAN OR SPECIFICATION
• DOES THE CONTRACT ALLOW FOR SUBROGATION RIGHTS IN
  THE EVENT OF DEFECTIVE MATERIALS, DESIGN, PLAN OR
  SPECIFICATION OR OFF-SITE WORKMANSHIP.

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GENERAL CONSIDERATIONSTHIRD PARTY LIABILITY - 1

• LIMIT OF INDEMNITY (INCLUSIVE OR EXCLUSIVE OF
  EXTENSIONS R00,000,000
• PROPERTY DAMAGE EXCESS
• RISK LOCATION RELATIVE TO
• ADJACENT PROPERTIES
• EXISTING PUBLIC SERVICES OF WATER, SEWERAGE,
  ELECTRICITY OVERHEAD LINES OR UNDERGROUND CABLES
• EXISTING PROPERTY ADJACENT TO CONTRACT WORKS SITE
• IS THERE TO BE ANY BLASTING, IF SO, GIVE DETAILS
• DEPTH OF EXCAVATION
• WILL THE EXCAVATION AFFECT THE SUPPORT OF
  ADJACENT THIRD PARTY BUILDINGS
• EXPERTISE OF DESIGN ENGINEER AND CONTRACTOR
• ARE THE WORKING METHODS STANDARD AND WILL THERE
  BE ANY METHODS OF WORK UNFAMILIAR TO THE
  CONTRACTOR

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GENERAL CONSIDERATIONSPUBLIC LIABILITY - 2

• ONE MUST THEN CONSIDER THE NECESSITY TO INCLUDE
  ANY OR ALL OF THE FOLLOWING EXTENSIONS OF COVER
• ARREST, ASSAULT, DISCHARGE AND DEFAMATION
• EMERGENCY MEDICAL EXPENSES
• PREVENTION OF ACCESS
• LEGAL DEFENCE COSTS
• TRESSPASS OR NUISANCE
• REMOVAL OF SUPPORT (LATERAL OR VERTICAL) COULD BE
  AN EXTENSION, HOWEVER THE TERMS OF THIS COVER
  DIFFERS CONSIDERABLY FROM THE BASIC COVER, THUS
  IT IS DESIREABLE TO ISSUE A SEPARATE SECTION OR
  POLICY. THIS COVER WILL BE DISCUSSED SEPERATELY.

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PREMIUM COMPUTATION CONTRACT WORKS GENERAL - 1

• UNDERWRITING IS A SCIENCE AND NOT MERELY A RULE
  OF THUMB
• THE UNDERWRITER WHO RELIES ON GUESSWORK MAY BE
  LUCKY FOR A PERIOD BUT WILL SOON COME SHORT
• ONE CANNOT ASSUME THAT A SINGLE RATE WOULD APPLY
  TO ALL AND ANY PROJECT, NO MATTER HOW SLIGHT,
  THERE ARE ALWAYS DIFFERENCES WHICH COULD MAKE A
  VAST DIFFERENCE TO THE RATE CHARGED
• ACCORDINGLY EACH RISK MUST BE UNDERWRITTEN ON ITS
  OWN MERITS AND PECULIARITIES WITH EACH ASPECT
  BEING GIVEN INDIVIDUAL CONSIDERATION
• WE THEN CALCULATE INDIVIDUAL RATES FOR THE CIVIL,
  STRUCTURAL,ELECTRICAL MECHANICAL AND LIABILITY
  RISKS
• NO, I AM NOT GOING TO GIVE YOU BASIS RATES, BUT I
  WILL SUGGEST METHODS OF CALCULATION. THE BASIS
  RATES ARE FOR EACH UNDERWRITING HOUSE TO
  DETERMINE THEMSELVES.

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PREMIUM COMPUTATION CONTRACT WORKS GENERAL - 2

• IT MUST BE APPRECIATED THAT PERILS OF THE
  ENVIRONMENT HAVE A DIFFERENT IMPACT ON EACH OF
  THE
• CONSTRUCTION DISCIPLINES
• FOR EXAMPLE, EXCESSIVE RAINFALL MAY NOT BE AS
  CRITICAL TO A PARTLY CONSTRUCTED STRUCTURE AS IT
  WOULD TO FOUNDATION EXCAVATIONS, ON THE OTHER
  HAND WIND MAY NOT CAUSE MUCH DAMAGE TO AN
  EXCAVATION AS IT WOULD TO A STRUCTURE NOT
  ENTIRELY BRACED OR STEEL BEING LIFTED INTO
  POSITION A FURTHER PROBLEM WOULD BE WHEN A
  STRUCTURE IS NOT FULLY CLAD THUS CAUSING A WIND
  TUNNELL WITHOUT ANY EXIT
• FIRE IS A HAZARD MORE SERIOUS WHERE THE BUILDING
  IS NEARING COMPLETION OR WHERE MACHINERY HAS BEEN
  INSTALLED OFTEN PACKING MATERIALS ARE NOT REMOVED
  FROM SITE. FIRE IS NOT THAT SERIOUS WHEN RELATED
  TO EXCAVATIONS OR FOUNDATIONS ONE COULD EXPECT
  MINIMAL DAMAGE

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PREMIUM COMPUTATION CONTRACT WORKS CIVIL WORKS
1

• It is usual for there to be a specific rate for
  each project type e.g.. ROADS, RAILWAY SYSTEMS,
  DAMS, SHAFT SINKING, AIRPORT RUNWAYS/APRONS,
  TUNNELLING AND THE LIKE
• THE APPLICABLE RATE X (SAY 2.5) MUST THEN BE
  APPORTIONED TO RISK CATEGORIES, FOR EXAMPLE,
  (THESE ARE JUST AN ILLUSTRATION AND ARE NOT
  REALISTIC) STORM/WIND 45 FIRE/LIGHTNING/EXPLOSION
  5 COLLAPSE/LANDSLIDE 40 THEFT/MALICIOUS DAMAGE
  10
• NEXT ONE MUST DECIDE ON THE EXTENT OF THE RISK
  APPLICABLE TO EACH CATEGORY, THUS STORM AND WIND
  ARE 45 OF 2.5 1.125 BUT THE WORK IS BEING
  UNDERTAKEN DURING THE DRY SEASON THEREFORE THIS
  RISK IS REGARDED AS MINIMAL SAY 25 OF THE NORM,
  OUR RATE FOR THIS PORTION IS THUS 25 1.125
  0.281
• THE SAME CALCULATION IS CARRIED OUT FOR EACH OF
  THE OTHER CATEGORIES OF THE RATE X

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PREMIUM COMPUTATION CONTRACT WORKS CIVIL WORKS
2

• THE NEXT PART OF THE CALCULATION IS TO TAKE INTO
  ACCOUNT THE PERIOD ON RISK, THIS MAY NOT ONLY BE
  THE CONSTRUCTION PERIOD, BUT THE RISK MAY
  CONTINUE UNTIL TAKE-OVER OF THE COMPLETED PROJECT
  AS IN THE CASE OF A TURNKEY PROJECT
• IT MUST BE REMEMBERED THAT IF TAKE-OVER IS TO BE
  DELAYED UNTIL FINAL COMPLETION, THEN THE CIVIL
  RISK WILL BE EXPOSED FOR A PERIOD THAT MUST BE
  DETERMINED (DURING CONSTRUCTION AND THEREAFTER
  UNTIL TAKEOVER)
• FINALLY THERE MUST BE A CHARGE FOR THE
  MAINTENANCE PERIOD DEPENDING ON THE NATURE OF
  MAINTENANCE COVER REQUIRED IN TERMS OF THE
  CONTRACT
• THE CUMULATIVE RATE IS THEN APPLIED TO THE CIVIL
  PORTION OF THE CONTRACT VALUE TO PRODUCE A
  PREMIUM.

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PREMIUM COMPUTATION CONTRACT WORKS STRUCTURAL
WORKS 1

• There is a specific rate for each project type
  e.g.. RESIDENTIAL BUILDINGS, OFFICE BLOCKS,
  HOTELS, HOSPITALS, SHOPPING MALLS, BRIDGES,
  FACTORY PREMISES, WATER TOWERS CHIMNEYS AND THE
  LIKE
• THE APPLICABLE RATE X (SAY 1) MUST THEN BE
  APPORTIONED TO RISK CATEGORIES, FOR EXAMPLE,
  (THESE ARE JUST AN ILLUSTRATION AND ARE NOT
  REALISTIC) STORM/WIND 20 FIRE/LIGHTNING/EXPLOSION
  30 COLLAPSE/LANDSLIDE 35 THEFT/MALICIOUS
  DAMAGE 15
• NEXT ONE MUST ONE MUST DECIDE ON THE EXTENT OF
  THE RISK APPLICABLE TO EACH CATEGORY, THUS FIRE
  ETC. ARE 30 OF X(X BEING SAY 1) (30X) 0.3
  BUT THE WORK IS BEING UNDERTAKEN OUT OF THE
  LIGHTNING SEASON AND ALL PACKING MATERIALS ARE
  REMOVED FROM THE BUILDING THEREFORE THIS RISK IS
  REGARDED AS MINIMAL SAY 20 OF THE NORM, OUR RATE
  FOR THIS PORTION IS THUS 20 OF 0.3 0.06
• THE SAME CALCULATION IS CARRIED OUT FOR EACH OF
  THE OTHER CATEGORIES OF THE RATE X

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PREMIUM COMPUTATION CONTRACT WORKS STRUCTURAL
WORKS 2

• THE NEXT PART OF THE CALCULATION IS TO TAKE INTO
  ACCOUNT THE PERIOD ON RISK, THIS MAY NOT ONLY BE
  THE CONSTRUCTION PERIOD, BUT THE RISK MAY
  CONTINUE UNTIL TAKE-OVER OF THE COMPLETED PROJECT
  AS IN THE CASE OF A TURNKEY PROJECT
• IT MUST BE REMEMBERED THAT IF TAKE-OVER IS TO BE
  DELAYED UNTIL FINAL COMPLETION, THEN THE
  STRUCTURAL RISK WILL BE AT RISK FOR AN EXTENDED
  PERIOD WHICH MUST BE DETERMINED ESPECIALLY IF
  MACHINERY IS TO BE INSTALLED BEFORE TAKE-OVER OF
  THE COMPLETED STRUCTURE THUS AN ADDITIONAL CHARGE
  FOR THE EXTENDED PERIOD AFTER CONSTRUCTION IS
  WARRANTED
• FINALLY THERE MUST BE A CHARGE FOR THE
  MAINTENANCE PERIOD DEPENDING ON THE NATURE OF
  MAINTENANCE COVER REQUIRED IN TERMS OF THE
  CONTRACT
• THE CUMULATIVE RATE IS THEN APPLIED TO THE
  STRUCTURAL PORTION OF THE CONTRACT VALUE TO
  PRODUCE A PREMIUM.

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PREMIUM COMPUTATION CONTRACT WORKS ELECTRICAL
MECHANICAL WORKS - 1

• UNLIKE CIVIL AND STRUCTURAL RATING, THE
  ELECTRICAL AND MECHANICAL RATE IS BUILT UP OVER A
  NUMBER OF FACTORS, THESE ARE
• HANDLING AND STATIC TESTING
• TESTING AND RUNNING
• FIRE AND SPECIAL PERILS DURING CONSTRUCTION
• FIRE AND SPECIAL PERILS DURING TESTING
• ENVIRONMENT
• BENEFICIAL USE IF REQUIRED IN TERMS OF CONTRACT
• MAINTENANCE ONCE AGAIN BASED ON THE REQUIRED
  COVER
• EACH OF THESE RATE COMPONENTS HAS ITS OWN
  SPECIFIC RATE WHICH EXCEPT FOR THE HANDLING AND
  STATIC TESTING RATE ARE ADJUSTED TO TAKE IN TO
  ACCOUNT THE PARTICULAR PERIOD OF COVER AND RISK
  FACTOR. EACH OF THESE RATE COMPONENTS ARE
  EXPLAINED AS FOLLOWS

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PREMIUM COMPUTATION CONTRACT WORKS ELECTRICAL
MECHANICAL WORKS - 2

• HANDLING AND STATIC TESTING THIS RATE COMPONENT
  ALLOWS FOR PRE ERECTION STORAGE ON SITE, MOVEMENT
  FROM STORAGE TO POINT OF ERECTION, HOISTING ONTO
  FOUNDATIONS, ASSEMBLY THEN NON ENERGISED TESTING
• TESTING AND RUNNING IT IS AT THIS STAGE THAT
  POWER IS FIRST APPLIED TO THE MACHINE AND
  FEEDSTOCK INTRODUCED. EFFECTIVELY THIS COVER
  EQUATES TO MACHINERY BREAKDOWN COVER. THE PERIOD
  IS USUALLY RESTRICTED TO 30 DAYS ON WHICH THE
  MACHINERY IS OPERATED FOR TESTING PURPOSES. IT IS
  ASSUMED THAT ALL MANUFACTURERS SAFETY
  REQUIREMENTS AND COMMISSIONING PROCEDURES WILL BE
  ADHERED TO AND THAT SAFETY DEVICES WILL NOT BE
  OVERRIDDEN OR NULLIFIED. IT IS USUAL THAT WHERE
  THERE ARE ANY UNTRIED FEATURES OR PROTOTYPES THAT
  TESTING COVER WILL BE EXCLUDED
• TESTING COVER IS USUALLY ONLY GIVEN ON NEW
  MACHINERY

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PREMIUM COMPUTATION CONTRACT WORKS ELECTRICAL
MECHANICAL WORKS - 3

• FIRE AND SPECIAL PERILS THESE RISKS ARE NO
  DIFFERENT TO THOSE GIVEN UNDER A FIRE OR ASSETS
  POLICY, ACCORDINGLY, THE RATE SHOULD BE SIMILAR
  TO THE STANDARD FIRE POLICY. THIS COMPONENT IS
  DIVIDED INTO TWO CATEGORIES, NAMELY DURING
  CONSTRUCTION AND THEN DURING TESTING AND RUNNING.
  A LESSER RATE SHOULD BE APPLIED TO THE
  CONSTRUCTION PERIOD POSSIBLY 50 OF FIRE PERILS
  RATE, WHEREAS THE FULL RATE SHOULD BE APPLIED TO
  THE TESTING PERIOD. IN BOTH INSTANCES THE RATE
  SHOULD BE ADJUSTED FOR THE PERIOD OF COVER
• ENVIRONMENT THIS COMPONENT TAKES INTO
  CONSIDERATION THE RISKS OF THEFT, MALICIOUS
  DAMAGE GEOTECHNIC AND HYDROLOGY RISKS AND A
  VARIETY OF OTHER MINOR PERILS.

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UNDERWRITING CRITERIAPUBLIC LIABILITY - 1

• THIS SECTION OF THE POLICY PROVIDES FOR LIABILITY
  TO THIRD PARTIES IN RESPECT OF LOSS OF OR DAMAGE
  TO PROPERTY OR PERSONAL INJURIES OR DEATH OF
  PERSONS NOT BEING EMPLOYEES OR THE FAMILY OF THE
  INSURED PARTY
• WE ARE NOT TALKING ABOUT A SEPARATE POLICY, BUT
  AS A SECTION TO A CONSTRUCTION POLICY, THUS ANY
  LIABILITY INCURRED SHOULD ORIGINATE AT THE
  CONTRACT SITE IN CONNECTION WITH SITE ACTIVITIES
  DURING THE PERIOD OF INSURANCE
• TO PROVIDE FOR ANY WIDER COVER A GENERAL
  LIABILITY POLICY SHOULD BE TAKEN OUT IN THE
  ACCIDENT DEPARTMENT
• THERE ARE TWO BASES OF COMPUTING PUBLIC LIABILITY
  PREMIUMS EITHER ON
• LIMIT OF LIABILITY,
• OR CONTRACT VALUE
• NEITHER BASIS CAN BE CONSIDERED SUPERIOR TO THE
  OTHER, EFFECTIVELY THE PREMIUM SHOULD BE THE
  SAME

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UNDERWRITING CRITERIAPUBLIC LIABILITY - 2

• RECOGNISING THAT THERE ARE TWO ACCEPTABLE BASES,
  WHAT FACTORS SHOULD BE TAKEN INTO CONSIDERATION
  IN COMPUTING THE PREMIUM
• ALL THOSE LISTED HEREUNDER WILL EITHER BE
  PROMINENT IN THE PREMIUM CALCULATION OR OF LITTLE
  OR NO EFFECT, EACH MUST BE CONSIDERED ON MERITS
• IS THE SITE A GREEN FIELDS OR BROWN FIELDS SITE,
  IS THERE A POSSIBILITY OF DAMAGE TO EXISTING
  PROPERTY EITHER ON-SITE OR ON SITES ADJACENT TO
  THE CONTRACT SITE,
• IS THE RISK LOCATION IN/OUT OF TOWN ARE THERE
  ANY PUBLIC SERVICES IN THE VICINITY,
• ARE ANY EXPLOSIVES TO BE USED,
• DEPTH OF EXCAVATION/ GEOTECHNIC RISKS,
• EXPERTISE AND TRACK RECORD OF CONTRACTOR AND
  DESIGN ENGINEER,
• WORKING METHODS AND DESIGN, PLAN OR
  SPECIFICATION,
• RISK MANAGEMENT
• THE POTENTIAL RISK OF SPREAD OF FIRE TO ADJACENT
  PROPERTIES EITHER ON SITE OR IN THE PROXIMITY
  THERETO

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UNDERWRITING CRITERIATHIRD PARTY LIABILITY - 3

• EXTENSIONS OF COVER
• ARE THE SELECTED EXTENSIONS OF COVER TO BE WITHIN
  THE OVERALL LIMIT OF INDEMNITY OR ARE THEY TO
  HAVE SEPARATE LIMITS OF INDEMNITY? IF SO, PLEASE
  PROVIDE THE REQUIRED LIMITS
• EXTENSION OF COVER LIMIT OF INDEMNITY
• ARREST,ASSAULT, DISCHARGE
• OR DEFAMATION R00,000,000
• EMERGENCY MEDICAL EXPENSES R 000,000
• PREVENTION OF ACCESS R 0,000,000
• LEGAL DEFENCE COSTS R 0,000,000
• TRESSPASS OR NUISANCE R00,000,000

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PREMIUM COMPUTATION PUBLIC (THIRD PARTY)
LIABILITY - 1

• THE CALCULATION BEGINS WITH A BASIC RATE WHICH
  IS A FUNCTION OF THE LIMIT OF INDEMNITY WHICH
  ENVISAGES A 12 MONTH CONTRACT PERIOD, THE BASIC
  RATE DIFFERS ACCORDING TO WHETHER IT IS TO BE
  APPLIED TO THE CONTRACT VALUE OR THE LIMIT OF
  INDEMNITY
• THE FIRST ADJUSTMENT TAKES INTO CONSIDERATION THE
  PERIOD OF THE CONTRACT BY ADJUSTMENT UPWARDS OR
  DOWNWARDS FOR LONGER OR SHORTER PERIODS FROM
  TAKE-OVER OF SITE UNTIL FINAL HANDOVER OF THE
  PROJECT
• THE NEXT ADJUSTMENTS TAKE INTO CONSIDERATION
  THOSE PREVIOUSLY MENTIONED WHICH ARE AS FOLLOWS

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PREMIUM COMPUTATIONPUBLIC (THIRD PARTY)
LIABILITY - 2

• IS THE SITE GREEN FIELDS OR BROWN FIELDS IS THERE
  A POSSIBILITY OF DAMAGE TO EXISTING PROPERTY
  EITHER ON-SITE OR ON SITES ADJACENT TO THE
  CONTRACT SITE
• IS THE RISK LOCATION IN/OUT OF TOWN ARE THERE
  ANY PUBLIC SERVICES IN THE VICINITY
• ARE ANY EXPLOSIVES TO BE USED
• DEPTH OF EXCAVATION/ GEOTECHNIC RISKS
• EXPERTISE AND TRACK RECORD OF CONTRACTOR AND
  DESIGN ENGINEER
• WORKING METHODS AND DESIGN, PLAN SPECIFICATION
• RISK MANAGEMENT
• FINALLY THE EXTENSIONS MUST BE ADDRESSED

28
PREMIUM COMPUTATIONPUBLIC (THIRD PARTY)
LIABILITY - 3

• ARREST, ASSAULT, DISCHARGE AND DEFAMATION,
• EMERGENCY MEDICAL EXPENSES,
• PREVENTION OF ACCESS,
• LEGAL DEFENCE COSTS,
• TRESSPASS OR NUISANCE.
• THE COMPUTATION OF THE REMOVAL OF SUPPORT RISK IS
  UNDERTAKEN ON MUCH THE SAME BASIS, BUT THE BASIC
  RATE IS MUCH HIGHER THAN FOR STANDARD
  LIABILITIES
• WE HAVE NOT MENTIONED THE RISKS APPLICABLE TO
  IMPLOSION OF BUILDINGS BEFORE NOW, HOWEVER, THESE
  ARE MUCH MORE ONEROUS THAN ORDINARY LIABILITIES
  OR REMOVAL OF SUPPORT LIABILITIES, BUT WE DO NOT
  BELIEVE THESE RISKS TO BE APPROPRIATE TO THIS
  DISCUSSION.

29
PREPARING A QUOTATION

• IT IS IMPORTANT FOR THE UNDERWRITER TO BE AWARE
  OF HOW THE QUOTATION IS PRESENTED, YOU LIVE BY
  YOUR WRITTEN WORD, OR LACK THEREOF
• CLEARLY, IF THE INTERMEDIARY HAS ASKED FOR A
  CERTAIN EXTENSION AND THIS ASPECT HAS NEITHER
  NEGATIVELY NOR POSITIVELY BEEN ADDRESSED, IT CAN
  BE ARGUED THAT THE REQUEST HAS BEEN ACCEPTED
• THE FOLLOWING SUGGESTED QUOTATION WORDING MAY
  ASSIST IN EXPRESSING CLEARLY THE INTENTION
• AS AN INTERMEDIARY YOU TOO SHOULD DEFINE CLEARLY
  THE NATURE AND EXTENT OF COVER YOU ARE
  REQUESTING, THE ONUS IS THEN ON THE UNDERWRITER
  TO ACCEPT OR REJECT YOUR REQUEST BY WRITTEN
  COMMENT IN THE QUOTQTION PRESENTED.

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SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 1

• XYZ INSURANCE COMPANY LIMITED (THE INSURER)
• 25 SUMMER PLACE, GLORIOUS COVE
• INSURERS CONTACT PERSON JOHN DOE
• TELEPHONE NUMBER 011 398 0000
• E-MAIL ADDRESS DOEJ_at_XYZINS.CO.ZA
• DATE OF QUOTATION 1ST JULY, 2010
• CLIENT ABC MANUFACTURING LIMITED
• INTERMEDIARY SMITH AND JONES BROKERS - R SMITH
• INSURED PROJECT NEW ELECTRIC MOTOR MANUFACTURING
  FACILITY FOR ABC MANUFACTURING
• PROJECT VALUE R25,500,000
• CIVIL WORKS R5,000,000
• STRUCTURAL WORKS R7,500,000
• ELECTRICAL/MECHANICAL WORKS R10,240,000
• PRELIMINARY GENERAL R2,760,000

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SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 2

• POLICY WORDING
• XYZ INSURANCE COMPANY LIMITED CONTRACT WORKS
  WORDING OR ANY OTHER WORDING AS MAY BE AGREED BY
  THE COMPANY (XYZ INS CO LTD) (THE INTERMEDIARY
  MAY HAVE SUBMITTED A POLICY WORDING AS PART OF
  HIS QUOTATION REQUEST, YOU MUST COMMENT THEREON
  AS TO ITS ACCEPTABILITY OR OTHERWISE AND REFER TO
  AN ACCEPTABLE WORDING)
• THE INSURED PARTIES
• THE PRINCIPAL
• ABC MANUFACTURING LIMITED
• THE SITE CONTRACTOR
• MLM CONTRACTORS (PTY) LIMITED
• SUB-CONTRACTORS
• EMPLOYED ON THE CONTRACT SITE (EMPLOYED BY THE
  CONTRACTOR(S) OR NOMINATED BY THE PRINCIPAL) BUT
  ONLY TO THE EXTENT OF LOSS, DAMAGE OR LIABILITY
  ORIGINATING AT THE CONTRACT SITE ARISING OUT OF
  THEIR SITE INVOLVEMENT EXCLUDING ANY PROFESSIONAL
  ACTIVITY OR OFF-SITE MANUFACTURING OR
  MANUFACTURING GUARANTEES

32
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 3

• THE INSURED PARTIES (CONTINUED)
• ANY OTHER NAMED PARTY PROPOSED TO AND ACCEPTED BY
  THE INSURER SUCH AS PROJECT MANAGERS,
  MANUFACTURERS, SUPPLIERS OR PROFESSIONALS BUT
  ONLY TO THE EXTENT OF LOSS, DAMAGE OR LIABILITY
  ORIGINATING AT THE CONTRACT SITE, EXCLUDING ANY
  PROFESSIONAL ACTIVITY OFF-SITE MANUFACTURING
  PROCESS OR MANUFACTURERS GUARANTEES
• BASIS OF INDEMNIFICATION
• CONTRACT WORKS LIMIT OF INDEMNITY
• THE INSURED PROPERTY R25,500,000
• EXPEDITING COSTS
• 50 OF AGREED CLAIM EXCEEDING R100,000 OR
• WHERE LOSS DOES NOT EXCEED R100,000 50,000
• ESCALATION
• DURING CONTRACT PERIOD 15
• DURING PERIOD OF DAMAGE REINSTATEMENT 15

33
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 4

• CURRENCY FLUCTUATION 20
• DEMOLITION AND DEBRIS REMOVAL
• ASSOCIATED WITH DAMAGE TO WORKS R00,000,000
• WITHOUT DAMAGE TO THE WORKS R00,000,000
• PROFESSIONAL FEES R 0,000,000
• FIRE BRIGADE CHARGES R 0,000,000
• PUBLIC AUTHORITIES CHARGES R 0,000,000
• PUBLIC AUTHORITIES REINSTATEMENT R 0,000,000
• OFF-SITE STORAGE NOT AT MNFRS. R 0,000,000
• WORK AWAY R 0,000,000
• REMOVAL TO A PLACE OF SAFETY R 0,000,000
• RECORDS AND PLANS R 0,000,000
• CLAIMS PREPARATION COSTS R 0,000,000

34
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 5

• THIRD PARTY LIABILITY
• LIMIT OF INDEMNITY R00,000,000
• INCLUDED IN LIMIT OF INDEMNITY
• LEGAL DEFENCE COSTS R 0,000,000
• EMERGENCY MEDICAL EXPENSES R 000,000
• TRESSPASS OR NUISANCE R 0,000,000
• ARREST ASSAULT DISCHARGE
• DEFAMATION R 000,000
• WHERE A ZERO HAS BEEN PLACED OPPOSITE AN ITEM
  THIS MEANS THAT NO COVER IS TO BE GIVEN FOR THAT
  ITEM.
• NOTE TO UNDERWRITER
• THE LIMITS FOR THE EXTENSIONS SHOWN ABOVE ARE
  NOT NECESSARILY SUB LIMITS INCLUDED IN THE
  OVERALL LIMIT OF INDEMNITY. IF UNDERWRITTEN AS
  ADDITIONAL LIMITS THE WORDS INCLUDED IN LIMIT OF
  INDEMNITY SHOULD BE OMITTED AND THE WORDS
  ADDITIONAL TO LIMIT OF INDEMNITY ADDED

35
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 6

• THE PROPERTY INSURED
• THE PERMANENT WORKS BEING ALL WORKS AND PROPERTY
  AS DESCRIBED IN THE CONTRACT DOCUMENTS AS THE
  CONTRACT WORKS AND ANY TEMPORARY WORKS CREATED OR
  INSTALLED IN ORDER TO CONSTRUCT THE PERMANENT
  WORKS
• PERIOD OF COVER
• COVER COMMENCES WITH THE HANDING OVER OF THE
  CONTRACT SITE TO THE CONTRACTOR, OR THE DELIVERY
  OF MATERIALS AND OTHER THINGS FOR INCORPORATION
  INTO THE PROJECT DURING ANY PERIOD OF STORAGE ON
  OR ABOUT THE CONTRACT SITE AWAITING
  INCORPORATION, CONSTRUCTION OR ERECTION
• DURING ANY PERIOD OF OFF-SITE STORAGE AT ANY SITE
  AGREED BY THE INSURER WHICH SHALL NOT INCLUDE
  SUPPLIERS OR MANUFACTURERS PREMISES,
• WHILST BEING CONSTRUCTED, ERECTED OR INSTALLED,

36
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 7

• PERIOD OF COVER PERIOD OF COVER (CONTINUED)
• DURING ANY PERIOD OF CONTRACTUAL BENEFICIAL
  OCCUPATION OF ANY COMPLETED OR PARTIALLY
  COMPLETED WORKS DECLARED TO AND ACCEPTED (IN
  WRITING) BY THE INSURER NOT EXCEEDING MONTHS
• DURING ANY CONTRACTUAL MAINTENANCE PERIOD
  COVERING DAMAGE
• OCCURRING DURING CONTRACTUAL VISITS BY THE
  CONTRACTOR OR MANUFACTURER FOR THE PURPOSE OF
  CALIBRATION ADJUSTMENT OR MAKING GOOD DEFECTS OR
  DAMAGE DUE TO CONSTRUCTION OR ERECTION OR MAKING
  GOOD ANY DAMAGE DONE DURING SUCH CONTRACTUAL
  VISITS
• DAMAGE DUE TO PRIOR DEFECTS OR DEFECTIVE
  CONDITIONS BUT EXCLUDING THE DEFECTIVE
  CONDITION ITSELF, WHICH SHOULD FORM THE SUBJECT
  OF A MANUFACTURERS GUARANTEE OR PROFESSIONAL
  INDEMNITY

37
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 8

• THE DEDUCTIBLES
• IN RESPECT OF EACH AND EVERY CLAIM ARISING OUT OF
  OR IN CONNECTION WITH ANY ONE EVENT OR OCCURRENCE
  OR SERIES OF OCCURRENCES ARISING OUT OF OR IN
  CONNECTION WITH ANY ONE EVENT, THE INSURED SHALL
  BEAR THE FIRST
• PERIL EXCESS
• COLLAPSE R0,000
• STORM, WIND, TEMPEST, FLOOD, SNOW, R0,000
• HAIL, SLEET, FROST
• SUBSIDENCE, LANDSLIP R0,000
• DEFECTIVE DESIGN, PLAN, R0,000
• SPECIFICATION
• FIRE, LIGHTNING, EXPLOSION R0,000
• THEFT, MALICIOUS DAMAGE R0,000

38
SUGGESTED QUOTATION WORDING WORKS PLUS PUBLIC
LIABILITY - 9

• RATE AND PREMIUM BASED ON CONTRACT VALUE
• CONTRACT WORKS 0,00 R000,000
• THIRD PARTY LIABILITY 0,00 R 00,000
• TERMS AND CONDITIONS OF QUOTATION
• 1. THIS QUOTATION HOLDS GOOD FOR 90 DAYS FROM THE
  DATE SHOWN AS THE DATE OF QUOTATION
• 2. THE QUOTATION IS BASED ON THE UNDERWRITING
  INFORMATION SUPPLIED BY THE INTERMEDIARY WHICH
  SHALL FORM THE BASIS HEROF EXCEPT AS EXCLUDED
  HEREIN SHOULD THERE BE ANY CHANGES IN THE
  INFORMATION SUPPLIED THE COMPANY RESERVES THE
  RIGHT TO AMEND THIS QUOTATION ACCORDINGLY
• 3. THE DEFECTS EXCEPTION ENVISAGED HEREBY IS THE
  COSTS ADDITIONAL DE5 ,LEG2 ETC.

39
CONTRACTORS LIABILITIES

• A CONTRACTOR CAN INCUR LIABILITIES FROM MANY
  SOURCES THUS HE NEEDS A PACKAGE OF LIABILITY
  COVERS OVER AND ABOVE THAT GIVEN UNDER A CONTRACT
  WORKS OR CONSTRUCTION POLICY. IT CAN EVEN BE
  SAID THAT A COMPREHENSIVE LIABILITY PACKAGE
  SHOULD INCLUDE HIS POTENTIAL CONSTRUCTION RISKS
  LIABILITIES. ACCORDINGLY, THE CONSTRUCTION
  POLICY SHOULD EXCLUDE THE CONTRACTORS
  LIABILITIES, HOWEVER, WHERE OTHER PARTIES ARE
  INVOLVED ON THE CONSTRUCTION SITE THEY MAY NEED
  TO BE COVERED FOR CONSTRUCTION LIABILITIES.
• THE QUESTION THEN ARISES, SHOULD THE CONSTRUCTION
  POLICY WAIVE SUBROGATION RIGHTS AGAINST THE
  CONTRACTOR?

40
CONTRACTORS LIABILITY POLICY -1

• LET US EXAMINE THE RECOMMENDED COMPONENTS TO A
  COMPREHENSIVE CONTRACTORS LIABILITY POLICY
• IT IS UNUSUAL FOR THIS TYPE OF POLICY TO BE
  UNDERWRITTEN IN THE CONSTRUCTION OR ENGINEERING
  DEPARTMENT IT IS MORE AN ACCIDENT DEPARTMENT
  RISK,
• FIRSTLY, WE MUST UNDERSTAND THAT THESE COVERS CAN
  EITHER BE BASED ON CLAIMS MADE OR CLAIMS
  INCURRED
• THE FORMER BASIS RECOGNISES THAT ANY CLAIM LODGED
  AGAINST THE INSURED DURIUNG A PARTICULAR PERIOD
  OF INSURANCE, IRRESPECTIVE OF WHEN THE TRIGGERING
  EVENT OCCURRED, SHALL BE REGARDED AS VALID AS
  LONG AS IT FALLS WITHIN THE AMBIT OF THE POLICY,
• ON THE OTHER HAND ON A CLAIMS INCURRED BASIS ANY
  CLAIM LODGED AGAINST THE INSURED MUST THEN REVERT
  TO THE POLICY IN FORCE AT THE TIME THAT THE
  TRIGGERING EVENT OCCURRED

41
CONTRACTORS LIABILITY POLICY -2

• THE FOLLOWING ARE THE MORE COMMON SECTIONS TO A
  COMPREHENSIVE Contractors Liability Policy
• PUBLIC LIABILITY -GENERAL AND CONTRACTING
  LIABILITIES
• PRODUCTS LIABILITY PRODUCTS MANUFACTURED OR
  SUPPLIED
• EMPLOYERS LIABILITY INJURY OR SICKNESS ARISING
  OUT OF EMPLOYMENT,
• PROFESSIONAL INDEMNITY BREACH OF PROFESSIONAL
  ACTIVITY OR DUTY,
• MOTOR EXCESS OF LOSS LIABILITY DUE TO LOSS OR
  ACCIDENT DURING THE PERIOD OF THE POLICY,
• PRODUCTS GUARANTEE LIABILITY FOR PRODUCTS
  SUPPLIED, SOLD ,INSTALLED ETC.,
• PRODUCT RECALL WHERE SUCH PRODUCT MAY CAUSE
  INJURY OR DAMAGE,
• CARRIERS LIABILITY DAMAGE ARISING OUT OF THE
  CARRIAGE OF GOODS INCLUDING CONSEQUENTIAL LOSS,

42
CONTRACTORS LIABILITY POLICY -3

• LIABILITY SECTIONS CONTINUED
• PLANT HIRE LIABILITY LEGAL LIABILITY FOR LOSS OR
  DAMAGE IN TERMS OF A HIRE AGREEMENT INCLUDING
  CONSEQUENTIAL LOSS,
• PURE ECONOMIC LOSS CLAIMS MADE DURING THE PERIOD
  OF INSURANCE OTHER THAN FOR PROFESSIONAL SERVICES
  FOR COMPENSATION IN TORT, DELICT OR STATUTE
• THE EXTENSIONS OF COVER ARE SIMILAR TO THOSE
  UNDER THE MORE SPECIFIC CONSTRUCTION POLICY
  LIABILITY SECTION
• WHERE A MORE SPECIFIC POLICY INCLUDING
  LIABILITIES HAS BEEN TAKEN OUT THE CONTRACTORS
  LIABILITY POLICY WILL ONLY PROVIDE LIABILITY FOR
  DIFFERENCES IN COVER OR LIMIT OF INDEMNITY, IT
  WILL NOT BE BROUGHT IN
• TO CONTRIBUTION WITH THE MORE SPECIFIC POLICY

43
CONSTRUCTION PLANT INSURANCE - 1

• WHAT COMPRISES PLANT UNDER A CONSTRUCTION POLICY?
• MOBILE PLANT AND EQUIPMENT
• MOBILE CRANES, CRAWLER CRANES, DUMP TRUCKS,
  BULLDOZERS, ROAD SCRAPERS, BACKACTORS,
  EXCAVATORS, ROAD TANKERS (WATER, FUEL OR
  BITUMEN), ROAD ROLLERS
• NON MOBILE PLANT AND EQUIPMENT
• CONCRETE BATCH PLANT, CONCRETE MIXERS AIR
  COMPRESSORS, ELECTRICITY GENERATING PLANT, MINI
  SUB-STATIONS, CONVEYOR SYSTEMS, TOWER CRANES,
  WELDING GENERATORS AND TRANSFORMERS
• MINING PLANT AND EQUIPMENT
• DRAGLINES, EXCAVATORS, JUMBO DRILL RIGS, MINING
  SCOOPS, DUMP TRUCKS AND MINE WINDERS LONG WALL
  COAL CUTTERS, MINING SCOOPS AND TUNNELL BORING
  MACHINES

44
CONSTRUCTION PLANT INSURANCE - 2

• CLASSES OF OWNERSHIP
• CONTRACTORS WHO OWN PLANT FOR CONTRACTING WORK
• PLANT OWNED FOR OWN USE SUCH AS MINING
  OPERATIONS, INDUSTRIAL WORKS AND SERVICE
  INDUSTRIES
• PLANT HIRE COMPANIES FOR HIRE TO CUSTOMERS
• VIRTUALLY EVERY PROJECT REQUIRES PLANT OF ONE
  TYPE OR ANOTHER, LET US CONSIDER THE VARIOUS
  CATEGORIES OF PLANT
• CONSTRUCTION CONTRACTORS
• BUILDING CONTRACTORS CONCRETE BATCH PLANT,
  CRANES MOBILE, CRAWLER AND TOWER, CONCRETE
  MIXERS, CONCRETE ESCALATORS, PUMPS CONCRETE AND
  WATER, EXCAVATORS, BACKACTORS AND THE LIKE
• ROAD CONSTRUCTION CONTRACTORS THESE CONTRACTORS
  USE A LARGE VARIETY OF PLANT SUCH AS, SCRAPERS,
  EXCAVATORS, ROLLERS, BULLDOZERS, BACKACTORS,
  MOBILE CRANES,AIR COMPRESSOR SETS, PAVING
  MACHINES ETC.

45
CONSTRUCTION PLANT INSURANCE - 3

• MINING OPERATIONS (MAINLY OPENCAST)
• EXCAVATORS, DRAGLINES, JUMBO DRILLS, EARTH MOVING
  TRUCKS, MINING SCOOPS, CONVEYOR SYSTEMS,
  CRUSHERS, CRANES, COMPRESSORS, DIESEL GENERATING
  PLANT ETC.
• IN SOME INSTANCES THE PLANT MAY INCLUDE MINE
  WINDERS
• OR TUNNELL BORING MACHINES
• PLANT HIRE COMPANIES
• THEIR PURPOSE IS AS A SERVICE TO CONSTRUCTION,
  MINING AND INDUSTRY, TO PROVIDE PLANT AND
  MACHINERY AS REQUIRED FOR A VARIETY OF JOBS.
  SOMETIMES THESE HIRE COMPANIES ARE A DIVISION
  WITHIN A CONSTRUCTION, MINING OR INDUSTRIAL
  COMPANY, THE PURPOSE OF WHICH IS TO SEPARATE THE
  COSTLY AND ONEROUS OWNERSHIP OF PLANT AND
  MACHINERY FROM THEIR CORE BUSINESS, WHETHER THIS
  BE CONSTRUCTION, MINING OR OTHER INDUSTRIAL
  ACTIVITY

46
CONSTRUCTION PLANT INSURANCE 4THE NEED FOR
INSURANCE

• THIS TYPE OF PLANT EQUIPMENT IS GENERALLY HIGH
  RISK, SUSCEPTIBLE TO IMPACT, FIRE, THEFT AND
  ELEMENTAL PERILS. WE ARE NOT SUGGESTING THAT THE
  USERS DO SO NEGLIGENTLY, CARELESSLY OR WITHOUT
  REGARD FOR POSSIBLE DANGER OR DAMAGE. PLANT IS
  USUALLY OPERATED BY A DEDICATED OPERATOR OR
  OPERATORS, THUS THE ONUS FOR ANY UNDUE OPERATION
  OF THE PLANT RESULTING IN DAMAGE COULD BE PEGGED
  AT THE DOOR OF AN INDIVIDUAL. IT MUST BE
  APPRECIATED THAT THIS TYPE OF PLANT HAS LARGE
  QUANTITIES OF FUEL OIL AND HYDRAULIC OIL BOTH OF
  WHICH ARE HIGHLY INFLAMABLE
• DEPENDING ON THE TERRAIN IN WHICH IT WORKS
  TOPPLING OVER OR OVERTURNING IS A VERY REAL RISK
• IN VIEW OF THE ELEMENT OF RISK WHICH IS HIGH
  VARIED IT WOULD BE UNWISE NOT TO INSURE THE PLANT.

47
CONSTRUCTION PLANT INSURANCE 5THE INSURANCE
POLICY COVER

• THE COVER IS SIMILAR FOR ALL CLASSES OF OWNERSHIP
• AS THIS EQUIPMENT IS ESSENTIALLY FOR OUTDOOR USE,
  IT QUALIFIES FOR WHAT CAN BE TERMED ALL RISKS
  COVER. THIS DOES NOT MEAN THAT THERE ARE NO
  TERMS AND CONDITIONS APPLICABLE TO THE INSURANCE,
  INDEED THERE ARE LIMITING FACTORS TO THE COVER.
  THE COVER EMBRACES
• ELECTRICAL AND MECHANICAL BREAKDOWN (OPTIONAL
  COVER)
• FIRE LIGHTNING EXPLOSION
• ELEMENTAL PERILS
• FLOOD
• THEFT MALICIOUS DAMAGE
• IMPACT COLLISION OVERTURNING
• UNINTENTIONAL OVERLOADING

48
CONSTRUCTION PLANT INSURANCE 6THE INSURANCE
POLICY EXCEPTIONS

• ALTHOUGH WE REFER TO THE COVER AS BEING ALL
  RISKS, NEVERTHELESS THERE ARE SOME EXCEPTIONS
  THESE ARE AS FOLLOWS
• WEAR AND TEAR AND GRADUAL DETERIORATION
• PENALTIES FOR DELAY AND GUARANTEES OF
  PERFORMANCE
• LOSS OF USE
• TYRES AND TUBES
• EXPENDABLE PARTS AND TOOLS
• THEFT NOT IDENTIFIABLE WITH A SPECIFIC INCIDENT
• TANDEM OR MULTIPLE LIFTS
• EXISTING DEFECTS, WILFUL ACTS OR NEGLIGENT ACTS
• EXPERIMENTS OR INTENTIONAL OVERLOADING
• WHILST BEING OPERATED BY A PERSON
• UNDER THE INFLUENCE OF INTOXICATING LIQUOR OR
  DRUGS,
• AUTHORISED BY THE OWNER OR HIS RESPONSIBLE PERSON
  WHO IS NOT QUALIFIED TO OPERATE THE PLANT
• ELECTRICAL OR MECHANICAL BREAKDOWN (IF OPTION NOT
  REQUIRED)

49
CONSTRUCTION PLANT INSURANCE 7HIRED-IN PLANT
POLICY AMENDMENT

• THE POLICY WORDING IS GENERALLY SIMILAR WHETHER
  COVERING OWNED PLANT OR HIRED-IN PLANT, TO
  ACHIEVE THE ADJUSTMENT TO THE STANDARD POLICY THE
  FOLLOWING MEMORANDA ARE INCLUDED
• A) THE INSUREDS LEGAL LIABILITY UNDER ANY HIRING
  AGREEMENT TO PAY COMPENSATION FOR PHYSICAL LOSS
  OF OR DAMAGE TO ANY INSURED HIRED-IN MACHINERY
  WHILST UNDER HIS CUSTODY OR CONTROL AT THE
  INSUREDS PREMISES DESCRIBED IN THE SCHEDULE
  HERETO
• B) THE INSUREDS LEGAL LIABILITY UNDER ANY HIRING
  AGREEMENT TO PAY CONTINUING HIRE CHARGES IN
  CONSEQUENCE OF PHYSICAL LOSS OF OR DAMAGE TO THE
  INSURED HIRED-IN MACHINERY DESCRIBED IN THE
  SCHEDULE HERETO FOLLOWING INDEMNIFIABLE LOSS OR
  DAMAGE PROVIDED FOR IN A) ABOVE
• AS PREVIOUSLY STATED THE POLICY REQUIRES THAT ANY
  HIRING AGREEMENT SHALL BE NO MORE ONEROUS THAN
  THE CPHA CONDITIONS.

50
CONSTRUCTION PLANT INSURANCE 6HIRED IN/OUT
PLANT MACHINERY

• THIS PLANT AND EQUIPMENT IS HIRED IN/OUT UNDER
  SPECIFIC HIRING CONDITIONS. INSURERS PREFER THE
  CONDITIONS AS PUBLISHED BY THE PLANT HIRE
  ASSOCIATION KNOWN AS THE CPHA CONDITIONS. THE
  CPHA CONDITIONS ARE CONSIDERED TO BE THE MOST
  FAIR FROM BOTH THE OWNERS AND THE HIRERS POINTS
  OF VIEW. IN FACT, A POLICY COVERING HIRED PLANT
  OFTEN INCLUDES A MEMORANDUN WHICH STATES
• THIS INSURANCE IS BASED ON HIRING AGREEMENTS NO
  MORE ONEROUS THAN THOSE PUBLISHED BY THE
  CONTRACTORS PLANT HIRE ASSOCIATION, SHOULD PLANT
  HAVE BEEN HIRED UNDER OTHER HIRING AGREEMENTS
  THEN ANY LOSS OR DAMAGE COVERED UNDER THIS POLICY
  WILL BE ADJUSTED AS IF THE CPHA CONDITIONS HAD
  BEEN IN FORCE

51
CONSTRUCTION PLANT INSURANCE 7RISK ASSESSMENT

• THE INFORMATION REQUIRED EMBRACES THE FOLLOWING
• IS THE PLANT OWNED OR HIRED IN
• IF HIRED IN, THE APPLICABLE CONDITIONS OF HIRE
• THE TYPE OF HIRED IN PLANT AND THE HIRE CHARGE
  FOR THE PERIOD OF HIRE
• WHETHER ANY HIRED IN ITEM HAS A REPLACEMENT VALUE
  EXCEEDING R------ (NOT ALL INSURERS REQUIRE THIS)
• FOR OWNED PLANT A FULL SCHEDULE OF PLANT TO BE
  INSURED AND THE NEW REPLACEMENT VALUE OF EACH
  ITEM
• DETAILS OF TOWER CRANES AND OTHER CRANES OWNED OR
  HIRED IN TOGETHER WITH COPIES OF THEIR LAST
  INSPECTION REPORT
• WHETHER THERE ARE TO BE ANY TANDEM OR MULTIPLE
  LIFTS, DETAILS THEREOF,INSURERS RESERVE RIGHT OF
  EVALUATION
• AGE OF ROPES AND SLINGS AND LATEST INSPECTION
  REPORT
• WHETHER LIFTING APPARATUS FITTED WITH LOAD
  GUAGES
• CERTIFICATE OF COMPETENCY OF CRANE OPERATORS
• EXPERIENCE OF RIGGERS WHO WILL CONTROL LIFTING
• DETAILS OF LOSSES OVER LAST THREE YEARS.

52
CONSTRUCTION PLANT INSURANCE 8CPHA HIRE
CONDITIONS

• THE FOLLOWING IS A RESUME OF THE CPHA HIRE
  AGREEMENTS
• THE HIRER MAY NOT CEDE ASSIGN NOR SUBLET THE
  AGREEMENT IN ANY WAY
• THE OWNER HAS AT ANY TIME THE RIGHT OF ACCESS TO
  SITE TO EXAMINE THE HIRED-IN PROPERTY
• THE HIRER MUST ENSURE THAT OR AT HIS OWN COST
  CREATE A SUITABLE WORKING TABLE FOR THE SAFE
  OPERATION OF ANY HIRED IN CRANE, FAILING WHICH
  THE AGREEMENT SHALL BE NULL AND VOID
• THE HIRER IS OBLIGED TO NOTIFY THE OWNER OF ANY
  DEFECTS IN THE PLANT AT THE TIME OF DELIVERY OR
  ANY DEFECTS THAT MAY DEVELOP DURING THE HIRE
  PERIOD, THE PLANT SHALL CEASE TO BE USED, ANY
  DAMAGE THAT MAY OCCUR DUE TO CONTINUED USE SHALL
  BE FOR THE COST OF THE HIRER
• THE PLANT IS TO BE USED ONLY WITHIN ITS RATED
  CAPACITY, IN THE CASE OF CRANES NO TANDEM LIFTS,
  UNLESS AGREED TO

53
CONSTRUCTION PLANT INSURANCE 9CPHA HIRE
CONDITIONS

• THE OWNERS OPERATOR BECOMES THE SERVANT OF THE
  HIRER WHO HAS THE ABSOLUTE CONTROL OF HIS
  ACTIONS
• RISK OF LOSS OR DAMAGE PASSES TO THE HIRER ONLY
  ON DELIVERY TO SITE UNLESS THE HIRER HAS ARRANGED
  TRANSIT OF THE PROPERTY TO SITE FROM THE OWNERS
  PREMISES IN WHICH CASE THE HIRER IS RESPONSIBLE
• THE HIRER INDEMNIFIES THE OWNER FOR ALL LIABILITY
  ARISING OUT OF THE USE OF THE PLANT BY THE HIRER
• THE HIRER SHALL BE RESPONSIBLE FOR ON-GOING HIRE
  CHARGES DUE TO INCLEMENT WEATHER OR NORMAL
  MAINTENANCE OR REPAIRING PUNCTURES AND THE LIKE
• THE HIRER SHALL NOT BE LIABLE FOR ON-GOING HIRE
  CHARGES DUE TO UNAVAILABILITY OF ANY OWNERS
  OPERATOR OR DUE TO BREAKDOWN FROM INHERENT
  DEFECT
• THE HIRER ACCEPTS LIABILITY FOR DIRECT CONS LOSS

54
CONSTRUCTION PLANT INSURANCE 10CPHA HIRE
CONDITIONS

• THE HIRER IS RESPONSIBLE FOR THE INSURANCE DURING
  THE HIRE PERIOD
• ANY BREACH OF CONDITIONS OF THE AGREEMENT OR ACT
  OF INSOLVENCY OR BEING PLACED UNDER JUDICIAL
  MANAGEMENT THE OWNER MAY REPOSSES THE PLANT ON
  HIRE AND WILL BE ENTITLED TO THE HIRE FEES DUE
  FOR THE FULL AND UNEXPIRED HIRE PERIOD
• IN THE CASE OF CRANES AND MOBILE PLANT HIRE FEES
  WILL BE BASED ON TIME SHEETS PREPARED BY THE
  PLANT OPERATOR AND SIGNED BY THE HIRER
• THERE IS NO OBLIGATION ON THE OWNER TO SUPPLY
  SLINGS, IF THESE ARE SUPPLIED NO RESPONSIBILITY
  IS ACCEPTED BY THE OWNER WHO HAS NO CONTROL OVER
  USE
• TYRES AND TUBES ARE THE RESPONSIBILITY OF HIRER
• PLANT MAY BE RECALLED FOR REPAIR BY THE OWNER.

55
EMPLOYERS LIABILITY - 1

• EMPLOYERS LIABILITY
• TO WHOM DO THE EMPLOYERS HAVE A POTENTIAL
  RESPONSIBILITY TO PAY COMPENSATION FOR INJURIES
  OR DISEASE DUE TO THEIR OCCUPATION,UNDER WHAT
  LAW
• PRIOR TO 1994 ALL EMPLOYEES EARNING LESS THAN A
  SPECIFIED AMOUNT, SPECIFIED IN TERMS OF THE
  WORKMANS COMPENSATION ACT (WCA), WERE CLASSED AS
  WORKMEN. THEY OR THEIR DEPENDANTS COULD CLAIM
  COMPENSATION UNDER THE ACT, BUT HAD NO LEGAL
  RIGHT TO SUE THEIR EMPLOYERS
• THOSE WORKMEN EARNING IN EXCESS OF THE PRESCRIBED
  AMOUNT WERE IN TERMS OF THE ACT CLASSED AS
  NON-WORKMEN
• NON WORKMEN WERE PRECLUDED FROM CLAIMING
  COMPENSATION FOR OCCUPATIONAL INJURIES OR
  DISEASE, UNDER THE WORKMANS COMPENSATION ACT,
  BUT WERE ABLE TO CLAIM COMPENSATION FROM THEIR
  EMPLOYERS FOR SUCH INJURIES OR DISEASE,
  ACCORDINGLY, MOST EMPLOYERS TOOK OUT EMPLOYERS
  LIABILITY INSURANCE

56
EMPLOYERS LIABILITY - 2

• IN 1994 THE COMPENSATION FOR OCCUPATIONAL
  INJURIES AND DISEASES ACT (130 OF 1993) WAS
  PROMULGATED, COMMONLY KNOWN AS THE COID ACT
• IN TERMS OF THE ACT ALL EMPLOYEES (THE BENEFITS
  ARE PEGGED TO BE A DEFINED INCOME LEVEL) AND
  PRECLUDES EMPLOYEES FROM CLAIMING COMPENSATION
  FROM THEIR EMPLOYERS FOR INJURIES OR DISEASE
  ARISING OUT OF THEIR OCCUPATION, ONLY IN
  EXCEPTIONAL CASES WHERE EMPLOYMENT IS NOT
  CLASSIFIED AS EMPLOYEES ARE THEY FREE TO SUE
  THEIR EMPLOYER FOR COMPENSATION UNDER COMMON LAW
  FOR SUCH INJURIES OR DISEASES
• THE COID ACT DEFINITION OF EMPLOYEE INCLUDES
  APPRENTICES AND LEARNERS, BUT NOT THOSE
  CONTRACTED TO CARRY OUT WORK FOR THE EMPLOYER OR
  THEIR SUB-CONTRACTORS
• CONSEQUENTLY EMPLOYERS LIABILITY CLAIMS ARE RARE

57
EMPLOYERS LIABILITY - 3

• UNDER A MODERN EMPLOYERS LIABILITY POLICY, DEATH
  AND BODILY INJURY INCLUDES DISEASE OR ILLNESS.
  THIS COVER IS UNLIKE PUBLIC LIABILITY POLICIES IN
  THAT PROPERTY DAMAGE IS NOT INCLUDED
• IT IS IMPORTANT TO UNDERSTAND THAT UNDER THE
  USUAL EMPLOYERS LIABILITY, INJURY OR ILLNESS MUST
  OCCUR DURING THE PERIOD OF INSURANCE. THE CLAIM
  MAY BE MADE AND THE INSURERS LIABILITY ARISE
  MANY YEARS AFTER THE CAUSE OF THE ACTION, EVEN
  AFTER THE ORIGINAL INSURER IS OFF RISK. THIS
  EQUATES TO A CLAIMS INCURRED WORDING. THE
  INSURER WHO WAS ON RISK AT THE TIME THE CAUSE
  OCCURRED IS THE INSURER RESPONSIBLE FOR THE CLAIM.

58
EMPLOYERS LIABILITY - 4

• IT IS RECOMMENDED THAT THIS CHAPTER (8) OF THE
  IISA CONSTRUCTION INSURANCE STUDY BOOK BE
  CAREFULLY READ
• THE COID ACT PROVIDES FOR COMPENSATION FOR
  DISABLEMENT CAUSED BY OCCUPATIONAL INJURIES OR
  DISEASES SUSTAINED OR CONTRACTED BY EMPLOYEES IN
  THE COURSE OF THEIR EMPLOYMENT, OR DEATH FROM
  SUCH INJURIES OR DISEASE.
• DISABLEMENT INCLUDES CONVENTIONAL BODILY INJURY
  UNDER A CONVENTIONAL EMPLOYERS LIABILITY POLICY
• DISABLEMENT AS DEFINED BY COID MEANS TEMPORARY
  PARTIAL DISABLEMENT TEMPORARY TOTAL DISABLEMENT,
  PERMANENT DISABLEMENT OR SERIOUS DISFIGUREMENT
• COID AFFORDS A MORE COMPREHENSIVE COVER THAN A
  NORMAL EMPLOYERS LIABILITY POLICY. UNDER AN
  EMPLOYERS LIABILITY POLICY, THE EMPLOYER HAS TO
  BE NEGLIGENT BEFORE A VALID CLAIM CAN ARISE.
  COID DOES NOT REQUIRE NEGLIGENCE ON THE PART OF
  THE EMPLOYER. IT IS SUFFICIENT FOR THE
  DISABLEMENT TO BE AS A RESULT OF AN ACCIDENT NOT
  NECESSARILY DUE TO NEGLIGENCE. THUS COID HAS A
  WIDER APPLICATION.

59
PROJECT 3TO BE PRESENTED AT NEXT SESSION

• An Employee, let us call him Joe, while working
  on a machine in the production shop and, not
  wearing a safety belt slips and falls to the
  ground some 4 metres below and breaks his leg, it
  is a compound fracture. He is incapacitated for
  six weeks while the bone heals, he cannot attend
  work, but returns to work at the beginning of the
  seventh week, although, the sore on his leg has
  not completely healed. Some three weeks later,
  when the sore still has not healed he visits his
  Doctor again and the Doctor identifies that
  gangrene has set in and is at an advanced stage,
  unfortunately, the only remedy is to amputate his
  leg.
• How will he be compensated under the Coid Act,
  would he have been treated any different under a
  Employers Liability Policy? What would the Coid
  Act Commissioner say about the lack of Safety
  belt?

60
PROFESSIONAL INDEMNITY INSURANCE1

• THIS IS A CLASS OF LIABILITY INSURANCE
• THE LAW RELATING TO DEFECTS IN BUILDINGS AND
  STRUCTURES AS WELL AS THAT RELATING TO ECONOMIC
  LOSS HAS BECOME ONEROUS TO CONTRACTORS,
  ENGINEERS, ARCHITECHTS, SURVEYORS AND OTHER
  PROFESSIONALS
• AS A CONSEQUENCE PROFESSIONAL INDEMNITY INSURANCE
  HAS BECOME OF GREAT SIGNIFICANCE TO PROFESSIONAL
  BODIES
• THE COVER IS ON A CLAIMS MADE BASIS IN OTHER
  WORDS IF A CLAIM IS FIRST MADE AGAINST AN INSURED
  SOME TIME AFTER THE OCCURRENCE OF THE EVENT THAT
  GAVE RISE TO THE CLAIM, THEN THE INSURER WHO IS
  CURRENTLY ON RISK SHALL BECOME LIABLE TO
  INDEMNIFY THE INSURED FOR THE CLAIM

61
PROFESSIONAL INDEMNITY INSURANCE2

• THE PRIMARY FUNCTION OF THE POLICY IS TO PROVIDE
  FOR FINANCIAL OR ECONOMIC LOSS IN OTHER WORDS
  LOSSES NOT ACCOMPANIED BY PHYSICAL DAMAGE OR
  BODILY INJURY
• IT IS IMPORTANT TO FULLY DESCRIBE ALL THE
  ACTIVITIES OF THE INSURED IN THE RECITAL CLAUSE
  AS THE INDEMNITY APPLIES TO THE STATED BUSINESS
  AND NO OTHER FOR EXAMPLE DESIGN AND CONSTRUCT
  CONTRACTORS, ARCHITECHTS, DESIGN ENGINEERS ETC.
• IT IS A LEGAL LIABILITY POLICY, THUS THE
  INSURERS OBLIGATION TO INDEMNIFY ONLY BECOMES
  PAYABLE ONCE THE INSURED HAS BEEN FOUND TO BE
  LEGALLY LIABLE
• PROFESSIONAL INDEMNITY IS NOT A CONTRACT BASED ON
  MORAL OR COMMERCIAL CONSIDERATIONS

62
PROFESSIONAL INDEMNITY INSURANCE3

• COVER IS BASED ON BREACH OF PROFESSIONAL DUTY
• THE CLAIM HAS TO BE MADE (AS PREVIOUSLY
  DISCUSSED) DURING THE PERIOD OF INSURANCE
• COVER ENVISAGES CLAIMS ARISING OUT OF NEGLIGENT
  ACTS, ERRORS OR OMISSIONS THESE WORDS HAVE NEVER
  BEEN DEFINED, SOME LEGAL CASES TAKE THE VIEW THAT
  THEY REFER TO NEGLIGENCE ONLY, THERE ARE, OF
  COURSE, OTHER INTERPRETATIONS
• IN THE CASE WIMPY CONSTRUCTION UK LTD. VS
  POOLE(1984) IT WAS HELD THAT THE TERM OMISSION
  ERROR OR NEGLIGENT ACT COVERED AN OMISSION OR
  ERROR WITHOUT NEGLIGENCE, EVEN THOUGH AN
  ANCILLARY CLAUSE IN THE POLICY REFERRED TO
  NEGLIGENT ACT, ERROR OR OMISSION

63
PROFESSIONAL INDEMNITY INSURANCE4

• THE DESIGN AND CONSTRUCT POLICY WORDING EXCLUDES
  ANY LIABILITY ARISING DUE TO THE INSURED
  (CONTRACTOR) HAVING GIVEN AN EXPRESS WARRANTY OR
  GUARANTEE THAT INCREASES THE INSUREDS LIABILITY.
  THIS EXCLUSION DOES NOT APPLY TO LIABILITY WHICH
  WOULD HAVE ATTACHED IN THE ABSENCE OF SUCH
  EXPRESS WARRANTY OR GUARANTEE
• THE P.I. POLICY REFERS NOT ONLY TO THE INSURED
  NAMED IN THE SCHEDULE , BUT ALSO TO PREDECESSORS
  IN BUSINESS OR ANY EMPLOYEE OF THE INSURED
• WHEN BUSINESSES AMALGAMATE OR SPLIT UP, THE
  APPLICATION OF THE PREDECESSORS TO BUSINESS
  CLAUSE CAN GIVE RISE TO DIFFICULTIES
• WHERE THERE HAS BEEN A RECENT AMALGAMATION OR
  SPLIT IT IS IMPORTANT TO ASCERTAIN EXACTLY WHAT
  THE LIABILITIES OF THE NEW AND OLD BUSINESSES
  ARE.

64
PROFESSIONAL INDEMNITY INSURANCE5

• NEGLIGENCE BY EMPLOYEES OF THE INSURED OR
  EMPLOYEES OF PREDECESSORS IN BUSINESS IS ALSO
  COVERED. MISTAKES BY EMPLOYEES ARE THE MOST
  FREQUENT CAUSE OF CLAIMS UNDER A P.I. POLICY
• THE P.I. POLICY ALSO PROTECTS THE INSURED AGAINST
  ANY LIABILITY HE MAY INCUR ARISING OUT OF THE USE
  OR EMPLOYMENT OF AGENTS
• THIS SUBJECT IS MAINLY A PUBLIC LIABILITY COVER
  AND WILL BE COVERED MORE EXTENSIVELY BY THE
  PUBLIC LIABILITY COURSE, WE THEREFORE, DO NOT
  INTEND TO GO FURTHER INTO THIS SUBJECT.

65
BUILDING DEFECTS INSURANCE1

• OTHERWISE KNOWN OVERSEAS AS DECENNIAL LIABILITY
• IT HAS ITS ORIGINS IN NAPOLEONIC LAW
• IT ONCE AGAIN GAINED POPULARITY AFTER THE FIRST
  WORLD WAR WHEN CONSIDERABLE CONSTRUCTION WAS
  TAKING PLACE IN EUROPE
• THE POLICY COVERS INHERENT DEFECTS IN BUILDING
  STRUCTURES WHICH ONLY BECOME MANIFEST AFTER THE
  COMPLETION OF CONSTRUCTION, WHERE THIS THREATENS
  THE STABILITY OF THE STRUCTURE DUE TO DESIGN PLAN
  SPECIFICATION MATERIALS OR WORKMANSHIP LANDSLIP
  SUBSIDENCE OR HEAVE IS ALSO COVERED
• THE COVER IS BASED ON THE DESIGN PLAN AND
  SPECIFICATION BEING FULLY DIVULGED TO INSURERS
  FOR APPROVAL BY THEIR CONSULTANTS AND THAT
  GEOTECHNIC AND HYDROLOGY TESTS ARE CARRIED OUT ON
  THE SITE AND THE RESULTS ARE GIVEN TO INSURERS
  FOR APPROVAL
• COVER MUST BE APPLIED FOR BEFORE COMMENCEMENT

66
BUILDING DEFECTS INSURANCE2

• THE PRIMARY COVER EXCLUDES WATERPROOFING OF THE
  BUILDING ENVELOPE, HOWEVER, THIS DOES NOT EXCLUDE
  DAMAGE TO THE STRUCTURE AS A CONSEQUENCE OF
  FAULTY WEATHER PROOFING
• INSURERS CONSULTANTS MUST BE GIVEN ACCESS TO
  SITE THROUGHOUT THE CONSTRUCTION PERIOD
• AFTER PRACTICAL COMPLETION A FURTHER INSPECTION
  OF THE ASPECTS THAT REQUIRED RECTIFICATION OR
  ATTENTION, ONCE SATISFACTORY COMPLETION HAS
  OCCURRED, BUILDING DEFECTS COVER CAN BE
  CONFIRMED
• COVER GENERALLY EXCLUDES FIRE AND ALLIED PERILS,
  DAMAGE DUE TO ALTERATIONS, MODIFICATIONS OR
  EXTENSIONS INADEQUATE MAINTENANCE OR WHERE THE
  DESIGN LOAD HAS BEEN EXCEEDED
• THIS COVER DOES NOT TAKE PRECEDENCE TO THE
  MAINTENANCE COVER AFFORDED BY THE CONSTRUCTION
  POLICY.

67
CONSEQUENTIAL LOSS DUE TO CONSTRUCTION ACCIDENTS

• THERE ARE A VARIETY OF CONSEQUENTIAL LOSS COVERS
  THAT MAY BE TRIGGERED BY CONSTRUCTION RISKS, BOTH
  THE EMPLOYER AND THE CONTRACTOR CAN BE EXPOSED TO
  LOSSES AS A RESULT OF CONSTRUCTION ACCIDENTS
• THE COVERS ENVISAGED ARE
• INCREASED COST OF WORKING CONTRACTORS,
• ADVANCE LOSS OF RENT EMPLOYERS AND DEVELOPERS,
• ADVANCE LOSS OF INTEREST EMPLOYERS AND
  DEVELOPERS,
• ADVANCE PROFITS/DELAYED START UP.- EMPLOYERS
• WE WILL EXAMINE EACH OF THESE INDIVIDUALLY

68
INCREASED COST OF WORKING

• ACCIDENTS ON SITE CAN CAUSE DELAYS IN COMPLETION
  OR EVEN IN A WORST CASE SCENARIO THE TOTAL LOSS
  OF CONSTRUCTED WORKS, SAY BY FIRE OR FLOOD ETC.
  ACCORDINGLY THE CONTRACTOR MAY BE AT A LOSS DUE
  TO HAVING TO CONTINUE TO REMUNERATE WORKERS AND
  PAY CONTINUING HIRE CHARGES FOR PLANT AND
  MACHINERY DAMAGED IN THE EVENT. THE CONTRACTOR
  WILL AS A RESULT BE OUT OF POCKET AS HE WILL NOT
  BE ABLE TO RECOUP THE INCREASED COSTS. COVER FOR
  SUCH LOSSES IS AVAILABLE IN THE MARKET BUT
  SUBJECT TO A TIME EXCLUSION AND INDEMNITY PERIOD,
  THE PREMIUM CHARGE IS NOT CHEAP.

69
ADVANCE LOSS OF RENT OR INTEREST

• THIS COVER IS MAINLY DIRECTED AT EMPLOYERS, BEING
  PROPERTY OWNERS OR DEVELOPERS, WHO MAY SUFFER
  RENT LOSSES DUE TO DELAYED OR NON COMPLETION OF
  THE WORKS. PART OF THE FEASABILITY STUDY BEFORE
  ENTERING INTO ANY CONTRACT FOR CONSTRUCTION, OR
  EVEN PURCHASING THE LAND, THE EMPLOYER EVALUATES
  THE OVERALL COST TO HIM AND AT WHAT POINT HE WILL
  START TO RECEIVE EARNINGS FROM HIS INVESTMENT.
  IT MUST BE REMEMBERED THAT HE IS EITHER USING HIS
  OWNN FINANCE OR HE IS TAKING OUT LOANS TO COVER
  THE COST OF DEVELOPMENT IN EITHER CASE HE IS
  EITHER LOSING INTEREST ON VESTED CAPITAL OR HE IS
  PAYING INTEREST ON THE LOAN. THE CONSTRUCTION
  PERIOD IS THUS VITAL TO HIS POTENTIAL COST

70
ADVANCE PROFITS OR DELAYED START-UP - 1

• THIS COVER IS ALLIGNED MAINLY TO PRODUCTION
  PROCESSES. INVESTORS WHO PUT MONEY INTO A
  VENTURE DO SO FOR THE PURPOSE OF INCREASING THEIR
  WEALTH THROUGH SUCH INVESTMENT, ACCORDINGLY, THEY
  EXPECT THE EARNINGS OF THE VENTURE TO COMMENCE ON
  SCHEDULE
• THE VENTURE MAY BE AN INDUSTRIAL MANUFACTURING
  PROCESS, MINING OR A CHEMICAL OR PETRO-CHENICAL
  FACILITY
• IRRESPECTIVE OF THE NATURE OF THE VENTURE, WHEN
  THE OPERATIONS RUN LATE, THIS BRINGS ABOUT AN
  UNEXPECTED LOSS TO THE INVESTOR. HAPPILY, HE CAN
  INSURE AGAINST THIS EVENTUALITY UNDER AN ADVANCE
  PROFITS POLICY
• THE ADVANCE PROFITS POLICY IS ONLY TRIGGERED BY
  AN INDEMNIFIABLE EVENT UNDER THE CONSTRUCTION
  POLICY.

71
ADVANCE PROFITS OR DELAYED START-UP - 2

• THE SUM INSURED UNDER THIS POLICY IS A FIXED
  AMOUNT BASED ON THE EXPECTED EARNINGS OF THE
  BUSINESS DURING THE PERIOD OF INDEMNITY SAY 12
  MONTHS, THE COVER IS SUBJECT TO AVERAGE.
• THERE IS, HOWEVER, A DEDUCTIBLE APPLICABLE TO THE
  INDEMNITY, THIS IS A TIME EXCLUSION WHICH IS
  USUALLY QUITE LENGTHY FOR COMPLEX PRODUCTION
  PROCESSES AND MINING, THIS COULD EXTEND TO THREE
  MONTHS, MOST STANDARD TRIED AND TESTED PROCESSES
  WOULD HAVE A 1 TO 3 WEEK EXCLUSION PERIOD, BUT
  NEVER LESS THAN 3 DAYS.
• SOME PROCESSES SUCH AS PETRO-CHEMICAL RISKS HAVE
  AN EXCLUSION OF COVER DURING THE FIRST 7 DAYS OF
  TESTING, IN OTHER WORDS ANY ACCIDENT OR FAILURE
• DURING THE FIRST 7 OPERATING DAYS, WHILE COVERED
  UNDER THE WORKS POLICY WOULD NOT QUALIFY FOR
  INDEMNITY UNDER THE ADVANCE PROFITS POLICY.

72
ADVANCE PROFITS OR DELAYED START-UP - 3

• CLEARLY, THE COVER MUST BE BASED ON A REALISTIC
  COMPLETION DATE (DATE ON WHICH COMMERCIAL
  PRODUCTION IS EXPECTED TO COMMENCE).
• THE CLIENT HAS AN OBLIGATION TO KEEP THE INSURER
  INFORMED ON OCCURRENCES AND EVENTS THAT MAY
  HAPPEN OR OCCUR THAT WOULD DELAY OR RETRACT THE
  COMPLETION DATE, THUS AFFECTING THE COVER UNDER
  THE POLICY. THE INSURER IS GIVEN ACCESS TO THE
  CONSTRUCTION SITE AT ANY REASONABLE TIME TO
  ENSURE THE WORK IS BEING UNDERTAKEN UNDER GOOD
  ENGINEERING PRACTICES AND TO QUANTIFY THE
  COMPLETION DATES OF INDIVIDUAL COMPONENTS AND THE
  INTEGRITY OF THE PROJECT AS A WHOLE.
• THE INSURER ALSO HAS THE RIGHT TO TAKE OVER AND
  CONTROL ANY REPAIR OR REPLACEMENT PROCEDURE TO
  ENSURE THAT THE WORK IS UNDERTAKEN EXPEDITIOUSLY
  AND TO PROPER STANDARDS OF ENGINEERING EXCELLENCE.

73
BONDS - 1

• CONTRACTORS ARE INVARIABLY REQUIRED TO PROVIDE
  CERTAIN TYPES OF BOND OR GUARANTEE. THE
  PROVIDERS OF THESE BONDS OR GUARANTEES ARE EITHER
  A BANK OR INSURANCE COMPANY. THE MOST USUAL
  BONDS ARE
• PERFORMANCE BONDS THIS IS ONE OF THE MOST
  IMPORTANT BONDS GIVEN BY A CONTRACTOR, IT IS
  FURNISHED BY THE CONTRACTOR BEFORE THE START OF
  THE CONTRACT. ITS SOLE PURPOSE IS TO PROTECT THE
  EMPLOYER AGAINST BREECH OF CONTRACT BY THE
  CONTRACTOR
• BID OR TENDER BOND THIS BOND IS SUBMITTED BY
  THE CONTRACTOR WITH HIS BID OR TENDER, THUS
  SHOWING THE EMPLOYER THAT HIS BID IS REASONABLE
  AND IF ACCEPTED THE CONTRACTOR WILL SIGN A
  CONTRACT TO PERFORM THE WORK INCLUDING ANY BOND
  REQUIREMENTS. THE BOND IS FORFEITED IN FAVOUR OF
  THE EMPLOYER IF THE CONTRACTOR FAILS TO PERFORM
  THE WORKS SPECIFIED IN THE TENDER

74
POINTS TO BE AWARE OF 1SITE PREPARATION AND
CLEARANCE

• SOUNDS QUITE INNOCUOUS DOESNT IT???
• NOT TOO SERIOUS IF IT INVOLVES REMOVAL OF
  UNDERGROWTH AND THE LIKE FOR THE MAKING OF A
  ROAD
• WHAT IF THE SITE CLEARANCE EMBRACES BUILDING
  DEMOLISHMENT OR MACHINERY DISMANTLING OR
  REMOVAL??
• SAY FOR EXAMPLE THE BUILDINGS WER