What Risks May a Contract Works Policy Cover?
Operating within the construction industry brings with it considerable risk. These risks should not be ignored, and contractors should be aware of all risks they are exposed to, whether contractual, political, or social before taking on any construction job. Certain risks can be allocated to suppliers and subcontractors, whereas other risks cannot be mitigated and therefore should be covered with a comprehensive insurance policy.
As a first step, risks should be recognised and assessed. The common risks faced during a construction project include:
- Adverse Physical Conditions: Construction sites are dangerous workplace environments. Workers have to navigate ground water, adverse soil conditions and contaminated ground, as well as being aware of any wells, pits, shafts and boreholes. These conditions can make it difficult to predict the outcome of the construction project, and may result in injury in the process.
- Delay and Disruption: Construction works are often delayed by third parties, due to late handing-over of the site by the employer, late working drawings or instructions from the engineer, waiting on machinery and equipment, inefficiency of nominated sub-contractor or labour disputes. This can result in huge costs being accumulated by the contractor.
- Defective Materials: A construction project can suffer a huge financial burden as a result of defective materials or poor workmanship of a sub-contractor or supplier. It is therefor imperative that your project is fully covered from the outset.
- Direction and Supervision: Construction projects can be greatly affected by the actions of the supervising employer or engineer. Incompetence, inefficiency, lack of communication or ambiguity within documents can have a serious negative impact on the entire construction project.
- Damage and Injury to Persons and Property: Operating within the construction sector brings with it great risk of accident and injury to employees or the general public. Accidents can occur due to negligence of the contractor, owner, engineer, or subcontractor, or due to matters that are out-with the parties’ control. Contract Works insurance could protect your business from suffering huge out of pocket costs.
- Payment: Issues with payment can arise as a result of devaluation, delay in settling claims and certifying, delay in paying certificates, legal limits on recovery of interest, insolvency of contractor, sub-contractor or owner, or Funding constraints.
The above are just some of the risks that may arise during your building project. Risk can, and should be managed to minimise potential costs to the business, however it’s important to back up your prevention strategies with a comprehensive insurance policy.