Main Insurable Contract Clauses Explained
6.5.1 Insurance – Non-Negligence Insurance Cover
JCT 6.5.1 Insurance covers damage to surrounding property that is not part of the Contract.
This policy covers the employer in respect of non-negligent damage or injury to any property when undertaking construction works including neighbouring properties. Cover includes claims for vibration, subsidence, collapse, weakening or removal of support. The policies are automatically issued in joint names of the contractor and employer.
6.7.3A – Insurance Option A
For projects involving new works – Contractor to arrange insurance in joint names of the contractor and employer on an ‘All Risks’ basis.
6.7.3B – Insurance Option B
For projects involving new works – Employer to arrange insurance in joint names of the employer and contractor on an ‘All Risks’ basis.
6.7.3C – Insurance Option C
Insurance Option C in the JCT Contract is for works consisting of the refurbishment of or modification or extension to existing structures – Employer to arrange insurance in joint names with the contractor on an ‘All Risks’ basis.
6.7.3C.1 – Insurance Option C.1
Damage to existing structures and their contents for specified perils – Employer to arrange insurance in joint names with the contractor.
Understanding JCT Non-Negligence Insurance Covers
Welcome to our comprehensive guide on JCT non-negligence insurance covers. In the realm of construction contracts, Joint Contracts Tribunal (JCT) agreements are widely used to define the relationships, responsibilities, and risks among the parties involved. One crucial aspect of these contracts is non-negligence insurance, a specialized form of coverage designed to protect against unforeseen events that may cause damage to the works without any party being at fault.
What is JCT Non-Negligence Insurance?
JCT non-negligence insurance, often included in Section 6.5.1 of the contract, is a form of insurance coverage that protects against damage to the works without the need to establish fault or negligence. In traditional insurance terms, it provides coverage for perils that are typically excluded from standard policies, ensuring a broader scope of protection for the construction project.
Key Features of JCT Non-Negligence Insurance Covers:
Coverage Beyond Negligence:
Unlike standard insurance policies that require proof of negligence for a claim to be valid, non-negligence insurance covers events and damages that occur without any fault from the parties involved.
Specified Perils:
Non-negligence insurance typically covers specific perils, such as subsidence, heave, landslip, and other ground-related risks. These perils are often excluded from standard insurance policies, making non-negligence insurance essential for comprehensive coverage.
Structural Damage:
The coverage extends to structural damage that may arise due to unforeseen events. This includes damage to the building or construction works that occurs without negligence but could significantly impact the project’s progress and completion.
Contractual Requirement:
JCT contracts may include a specific requirement for non-negligence insurance. Parties involved, including the employer and the contractor, must adhere to this contractual obligation to ensure comprehensive risk management.
Joint Names Policies:
Non-negligence insurance is often structured as a joint names policy, ensuring that both the employer and the contractor are named as insured parties. This joint approach aligns the interests of both parties in safeguarding the project.
Why Non-Negligence Insurance is Required:
Comprehensive Risk Mitigation:
Construction projects are susceptible to various risks, including ground-related issues that may not be attributed to negligence. Non-negligence insurance provides a comprehensive risk mitigation strategy, covering a broader range of potential perils.
Avoiding Disputes:
By incorporating non-negligence insurance into the contract, potential disputes related to responsibility for damages are minimized. This proactive approach helps maintain a positive working relationship among the parties.
Protecting Project Viability:
Unforeseen events that lead to non-negligent damage can pose a significant threat to a project’s viability. Non-negligence insurance ensures that the financial burden of addressing such issues doesn’t fall solely on one party, preserving the project’s continuity.
Contractual Compliance:
Adhering to the contractual requirement for non-negligence insurance is essential for compliance with the JCT agreement. Failure to maintain the necessary coverage could result in breaches of contract and potential legal ramifications.
In conclusion, JCT non-negligence insurance covers are a vital component of construction contracts, offering a proactive and comprehensive approach to risk management. Understanding the specific perils covered, contractual obligations, and the importance of joint names policies is crucial for all parties involved in ensuring the success and resilience of construction projects. For more information tailored to your project’s needs, consult with legal and insurance professionals to navigate the complexities of non-negligence insurance within JCT contracts.
What is Contract Specific Insurance Cover?
Both JCT and NEC have clause to stipulate the Insurance Cover that should be provided either by the Contractor or by the Employer. It will stipulate who should arrange it and on what basis (as per the above clauses), it will also set out who the Insured Parties should be and if any specific extensions should be included.
Why Have A Stand Alone Policy?
Many Contractors hold an annual Contract All Risk Insurance (CAR), however JCT contracts stipulate that the Contractor should arrange joint names policies on a Contract Specific Basis. Occasionally the annual policy is accepted but there are many benefits to arranging the Stand Alone Cover which include:
- One off fixed price rather than a variable annual policy.
- Ring fences this single project and will not influence claims and or renewal premiums of the annual policies.
- True Joint Names Policy rather than a noted interest in an Annual CAR.
- Specialist extension in cover can include Advance Loss of Profits.
This list is not exhaustive but it demonstrates that a Contract Specific Policy is better suited than an annual CAR policy certainly on larger projects and those longer than 12 months.
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