UK: Contractors All Risks Insurance - Changes Introduced By The Updated JCT 2016

Last Updated: 14 December 2016
Article by Edward Phillips

One of the key changes introduced by the updated JCT 2016 suite of contracts is to provide a new insurance option where the Employer is unable to comply with the requirement to take out a joint names insurance policy for the "existing structures" of a building (under the JCT Option C arrangement). This is a welcome change (or at least nod in the right direction) and one which seeks to address one of the more difficult issues arising in relation to refurbishment works contracts, particularly in multi-let buildings.

What are the issues?

By way of reminder, the issues commonly faced by Employers and Contractors when trying to decipher the insurance arrangements applicable to works in multi-let buildings are as follows:

  1. JCT Option C requires the Employer to take out a joint names policy for the Works and the existing structures on a "composite basis". This is typically procured through an existing buildings insurance policy, either with a separate works policy taken out or with an amendment to the buildings policy to include the Works.
  2. A Contractor working in an existing building will be keen to see that such cover is in place – without it the Contractor may be left exposed to a subrogated claim from the insurer of the building. This may be significant if the Contractor causes damage to a large or high value building and such claim may not be covered completely by the Contractor's public liability insurance policy.
  3. Difficulties arise where the Employer is not the insured party under a building insurance policy and/or has no control over the terms of such policy. This is often the case in a multi-let building where a landlord and its insurer are likely to be unwilling to include the Contractor as a joint insured.
  4. In the event that the Employer is not able to comply with the requirements of JCT Option C, amendments will need to be made to the standard JCT terms to reflect, in particular, the scope of cover that the Employer is able to procure. Typically this will mean that (i) the Contractor is not a joint insured in relation to the existing structures (and will be relying instead on the scope of its public liability cover); (ii) the Employer is obliged only to "procure" or use "reasonable endeavours to procure" that the Landlord maintains cover of the existing structures; (iii) consequential amendments are required to try and address what may happen in relation to reinstatement works and/or (iv) very often the insurance provisions in the relevant agreement for lease / licence for alterations document do not align with the insurance provisions under JCT Option C. In short, an imperfect and potentially very risky position.

How does the JCT 2016 suite of contracts address this issue?

  1. Although JCT Option C has been retained the Parties now have the option to replace paragraph C.1 with a "C.1 Replacement Schedule". This will give the Parties the ability to agree an alternative arrangement for the insurance of the existing structures where a joint names policy cannot be obtained by the Employer.
  2. The JCT has given some initial guidance as to how populating a C.1 Replacement Schedule may be approached, depending on the scope and nature of the Works. The examples given include:
    • For simple projects, the Contractor may choose to rely on its public liability cover. The Parties will need to ensure that such cover does not contain any exclusions of liability relating to the Works or the existing structures.
    • For more high value / complex projects, the Parties (in conjunction with the landlord of the building) could investigate a layered coverage, to include the Contractor's public liability cover, a top up of existing structures cover to be maintained by the Employer and the landlord's existing structures cover.
    • For very high value / complex projects, the Parties (again in conjunction with the landlord of the building) may decide that insurance will not be maintained for the full reinstatement value. Careful consideration will need to be given as to which party bears the risk of any shortfall.

What does this mean going forward? 

The inclusion of an optional C.1 Replacement Schedule should be welcomed. It has the potential to provide much needed flexibility to an issue which has historically been difficult to reconcile within the legal framework for refurbishment works. However, if the industry is going to get the most out of this change, the following approaches will be needed:

  1. An Employer tenant and its landlord will need to consider the C.1 Replacement Schedule when drafting any agreement for lease / licence for alterations documentation. It is in all parties' interests for the insurance provisions of these documents to align with what is required under the building contract. Both parties should discuss (and reach agreement on) the contents of any C.1 Replacement Schedule with the input of specialist insurance advisors.
  2. The Employer and Contractor will need to be clear what is required in relation to existing structures insurance and what is needed in relation to the Contractor's public liability insurance (and who bears the cost of any upgrade in the cover required). This should be addressed before and during the tender stage, again with input from specialist insurance advisors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.