At a glance
- An assumption that non-negligent construction insurance forms part of existing public liability insurance risks leaving contractors in breach of contract
- A legal precedent from 1958 places responsibility on employers for any damage caused to surrounding buildings on construction sites
- Building contracts require contractors to arrange non-negligent construction insurance on behalf of their clients
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Construction sites are by their nature dangerous. Just starting work involves an inevitable risk to the surrounding buildings and people.
Accidents or damage on site are usually caused by the contractors’ negligence, be it poor workmanship, defective materials or faulty equipment. In such circumstances, the public liability policy will usually cover any resultant damage to third party property. However, it is in those instances when negligence cannot be proven that can cause problems and brokers need to consider an often-overlooked part of standard building contracts.
The law states that in these cases, the property owner could be held liable and face financial consequences should an incident, such as damage to third party property or people, result from activities on site even where negligence by the contractor cannot be demonstrated.
Does responsibility lie fully with the contractor?
Within the JCT (Joint Contracts Tribunal) is Clause 6.5.1, which places a requirement on the contractor to organise joint non-negligent damage insurance for themselves and their client.
A 1958 legal precedent set by the Gold versus Fotheringham case, established that an employer who hires a contractor has a responsibility to pay compensation for any damage inflicted on third parties, even where such damage did not occur as a result of negligence.
Some contractors do not fully understand the implications of Clause 6.5.1. When damage occurs, they believe their existing public liability insurance policy will provide cover.
If the damage had been their fault this might be the case, but when negligence cannot be proven the contractor has no liability. As a result, some contractors may unwittingly have left their clients exposed and themselves potentially in breach of contract through failing to fully understand the terms of their policy.
How to get sufficient cover
As long as a contractor’s existing policy provider has a firm understanding of construction insurance, they should have a solution. At Zurich, for example, the Insurance for Builders products come with a range of flexible add-ons, which can provide as much cover as is required – including an option for non-negligent cover.
This insurance covers damage by collapse, subsidence, heave, vibration, weakening or removal, and lowering of groundwater in accordance with JCT requirements. While some insurers will offer quotes for non-negligent damage on a ‘stand-alone’ basis, it is advisable to use the same insurance firm that supplies the contractor’s public liability policy. This avoids debate about which insurer is responsible in the event of a dispute over whether or not the contractor has acted negligently.
For more information on this and other construction-related risks please speak with your local Zurich contact.
You can also find out more and access helpful guides and insight with our new Fire Risk Resource.</strong