The commercial insurance market can be a minefield for the construction trades and in particular the concrete industry, with a variety of differences in cover available. Here Phil Semmens, Account Director from our Bristol Office, explores the role of public and product liability and elaborates on the most overlooked shortcomings when placing these types of policies. To help you get the best of breed insurance for concrete contractors and businesses.
Concrete businesses: public and product liability insurance
The basic role of public and product liability insurance is to cover the cost of claim and legal action brought against a business by a third party for either death, injury or damage. Many insurance policies will have extensions to this basic foundation and it is important to know the extensions and cover you have or do not have. A policy that has a specific exclusion or limitation doesn’t mean that the policy is not suitable for the business. The limitation or exclusion could be one that the business is willing to burden themselves or mitigate via other means.
Let’s examine some of the notable extensions and exclusions of particular interest for concrete contractors and concrete businesses.
Efficacy insurance exclusions
Efficacy insurance, which is also commonly referred to as inefficacy insurance, is designed to protect you should a product you install fail to perform its intended function. That is why the cover is also referred to as “failure to perform” insurance.
If this failure to perform causes harm to your customer or their property, or even a third party, you could be liable and may even find yourself facing a potentially costly claim. The question to ask is, “if your product failed to perform what damage or injury could it cause?” For example, a failure of a precast flood defence wall to do its intended function and the flood water subsequently causes property damage or injury, or a pre cast lintel collapses under the weight of the structure above causing damage. Although efficacy is normally included as standard it is important that a check is made to establish that this cover is present in your concrete business insurance policy. The cost to insurers for efficacy related claims for the concrete industry can be high so insurers may choose to exclude it.
“Ripping and tear” insurance policy exclusions
Many insurers will apply the “ripping and tear” exclusion in a policy for the construction industry to further reduce the public and product liability exposure. This is due to the high cost of removing a product, such as a concrete foundation or concrete deck. Unlike many other products covered by Public and Product liability, concrete, screed, pre-cast products for example can be very costly to dig out and remove, as well as, damaging and time-consuming. Time can cause particular issue in the construction industry as it impacts the schedule of works and possibly activating time penalty clauses. Some insurers are willing to write this ripping and tear cover back into concrete contractor insurance policies. But this all depends on the risk proposed, and will bring additional premium.
Repair or rectification (rectifying defective work) exclusions
Usually an append to the “rip and tear” exclusion above, insurers can further reduce their exposure by excluding the cost to repair or rectify a product. Repairs such as epoxy resin injection for crack repair or spalling repair, lifting or settlement of a ground based slab. Again this can be written back in by some insurers but at a cost.
Resolve the gaps – insurance for concrete contractors and businesses
Many of the issues found in concrete applications and construction do not materialise for some time, and the exact cause can be difficult to determine, costly to determine and contentious. Think about how expensive, difficult and costly it would be to remove or repair your product?
A possible solution could be a latent defect insurance policy. Latent defects insurance can help to cover the cost of repairs or rebuilding if structural damage appears months or years after the practical completion of a new-build or conversion project. Latent defects may be caused by a fault in the building’s design or construction, or by faulty materials.
In many scenarios, particularly when a construction project involves many organisations, the alleged negligent party may dispute liability on the grounds of scope of contract. However if there are grounds to dispute an allegation the Legal challenge can be costly. Legal expense insurance can provide cover for solicitors’ fees if the correct policy is chosen, as many policies may not cover contract dispute.
If your business provides advice, instruction, consultancy, design, formula, specification, inspection, certification or testing this will usually be excluded within a standard public and product liability policy. Many businesses in the concrete sector will design products such as beam and block floors, lintels, pre-cast stairs etc. to very exacting standards such as BS 8110:1985, and to complex specification. Insurers will exclude this advice and design activity as cover is best placed under a professional indemnity policy. Professional indemnity insurance (PII) provides cover for legal costs and expenses involved in defending a claim, as well as compensation payable if you are found to be responsible for causing financial loss to your client because of negligent advice, services or designs you have provided.
The above examples are relevant areas to address when reviewing your insurance schedules. If you would like to know more about insurance for concrete contractors and businesses please get in touch with our specialist; Phil Semmens, Account Director - email@example.com.