Construction Insurance and UK Construction Contracts
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CHAPTER 17
Contract insurance under JCT Design and Build Contract 2011
General
17.1 As its name suggests, DB11 is intended for use where the contractor is not only to carry out the physical work and supply of materials necessary to complete a building project but also to carry out the whole of the design. By section 2.17.1 the liability of the contractor as designer is limited to a “like liability to the Employer, whether under statute or otherwise, as would an architect or, as the case may be, other appropriate professional designer holding himself out as competent to take on work for such design who, acting independently under a separate contract with the Employer, has supplied such design for or in connection with works to be carried out and completed by a building contractor who is not the supplier of the design”. 17.2 This obligation is potentially less onerous upon the contractor than that at common law: there is some authority for the proposition that a contractor who contracts to design and build a project takes on responsibility to ensure that the design of the building will render it fit for its purpose.1 If the obligation taken on is merely to use the reasonable skill and care of an architect or engineer, then there is a possibility that the contractor would not be liable where he has exercised the care that it would be reasonable for an architect or engineer to exercise but the resultant design is not fit for its purpose. 17.3 This has implications both for the drafting of the design and build contract and for the placing of insurance. From an employer’s perspective it would be desirable either to include a term whereby the contractor expressly warranted that the building as designed and constructed would be fit for its purpose, but a contractor would probably be unwilling to depart from the standard terms of DB11, or to omit section 2.17.1 and rely upon the common law, but in doing so undesirable uncertainty would be introduced into the contract. In practical terms the employer will generally have to accept that a designer exercising due skill and care should in most cases produce a design that was fit for its purpose. On the other hand, if the contractor were persuaded to give such an express warranty, it is likely that the contractor’s professional indemnity insurers would refuse to provide cover against liability under such a clause greater than that which would have applied in the absence of such a clause. By contrast, underwriters are generally willing to take on the risk of anyPage 269
Relevant provisions in the contract
17.5 The main provisions in DB11 relevant to insurance are summarised below. They follow the same form as SB11 and the discussion in the previous chapter in relation to SB11 applies equally to DB11:- Clause 6.1: the contractor is to indemnify the employer against claims in respect of death or personal injury arising out of the works, except to the extent that the employer is itself at fault.
- Clause 6.2: a similar indemnity is to be provided by the contractor to the employer in respect of property damage, other than damage to the works and to site materials, but only in so far as it results from the fault of the contractor.
- Clause 6.4.1: the liability of the contractor in respect of the above indemnities is to be insured by the contractor.3
- Clause 6.5.1: the employer may insist upon insurance in the joint names of the employer and contractor being procured by the contractor in respect of loss of or damage to property not caused by the fault of the contractor.
- Clauses 6.10-6.11: address the provision of terrorism cover, and the effect of the same being unavailable.
- Clauses 6.12-6.13: where there is a contractor’s designed portion, the contractor is required to take out and maintain a professional indemnity policy for the period stated in the contract particulars.
- Clauses 6.14-6.17: requires both parties to comply with the Joint Fire Code.
- A and B: in the case of new buildings, insurance of the works is to be effected either by the contractor (Option A), or by the employer (Option B), under
an all risks policy in the joint names of the employer and contractor, which leave the residual risk of any under insurance with the contractor and the employer, respectively.Page 270
- C: where there are existing buildings, insurance is to be effected by the employer in the joint names of the employer and contractor of the existing structures against specified perils and of the works, against all risks.
Specific clauses
Section 6 - clauses 6.1 to 6.3
Injury to persons and property
17.7 Apart from references being to the practical completion statement rather than the practical completion certificate, clauses 6.1 to 6.3 of DB11 are identical to those of SB11.4Section 6 - clauses 6.4.1 to 6.6
Insurance against personal injury and property damage
17.8 Apart from references in clause 6.4.2 being to the employer rather than the architect/contract administrator, clause 6.4 of DB11 is identical to clause 6.4 of SB11.5 17.9 Clause 6.5 provides that if the contractor is to be required to take out clause 6.5 insurance, the same must be stated in the employer’s requirements. Apart from that, clause 6.5 of DB11 is identical to clause 6.5 of SB11.Section 6 - clauses 6.7 to 6.11
Insurance of the works
17.10 The Insurance options of DB11 are identical to those of SB11.6 17.11 Clauses 6.8 to 6.11 are identical to those of SB11.Section 6 - clauses 6.12 to 6.13
17.12 Clauses 6.12 to 6.13 are identical to those of SB11.7Section 6 - clauses 6.14 to 6.17
17.13 Clauses 6.14 to 6.15 are identical to those of SB11.8Page 271
The insurance options
Schedule 3 - Option A
17.16 Option A concerns the insurance of new buildings by the contractor and is in materially identical terms to option A of SB11.9 17.17 Save for the reference to the architect or contract administrator being replaced by references to the employer, clauses A.2 and A.3 are in materially identical terms to clauses A.2 and A.3 of SB11. 17.18 Again, save for the reference to the architect or contract administrator being replaced by references to the employer, clause A.4 is in materially identical terms to clause A.4 of SB11. 17.19 Clause A.5 is in identical terms to its counterparts in SB11.Schedule 3 - Option B
17.20 Option B concerns the insurance of new buildings by the employer and is in materially identical terms to option B of SB11.10 17.21 Clauses B.2 and B.3 are in materially identical terms to their counterparts in SB11.Schedule 3 - Option C
17.22 Option C concerns the insurance of existing structures and works or extensions to them by the employer and is in materially identical terms to option C of SB11.11Subcontractors
17.23 The provisions of DB11 in relation to subcontractors are in materially identical terms to those of SB11.12 As already noted, the subcontractor’s protection is limited to specified perils and is therefore narrower than the cover provided by the all risks policy.
1 See House of Lords decision in IBA v EMI and BICC ; Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 and the more recent decision in Platform Funding Limited v Bank of Scotland Plc (formerly Halifax Plc) [2008] EWCA Civ 930; [2009] 2 WLR 1016.