There are many types of standardised Building Contracts; the choice of contract is normally dictated by the size of the building project. The contracts most commonly in use are;
- JCT Homeowner Occupier
- JCT Minor Works Contract
- JCT Intermediate Contract
- JCT Standard Building Contract
- RIBA Domestic Building Contract
Expert Insurance Group are able to advise on, and fulfil the insurance requirements, for all of these contracts as well as the other less commonly used building and renovation contracts.
JCT Homeowner Occupier
The JCT Homeowner Contract is a very basic form of agreement and is most likely going to be used for light, straight forward works with a relatively low cost.
Insurance Options
There are no insurance options to choose from in this contract, however the insurance requirements are as follows:-
- The customer must tell the household insurers that work is to be done at the premises. If the current home insurers can’t provide cover then an appropriate buildings insurance policy must be put in place by the customer for the duration of the renovation work.
- The contractor must have an “all risks” insurance policy to cover which is suitable to cover the full costs of damage to the building works and any unfixed materials being used in connection with the work.
- The contractor must have a public liability policy which covers death or injury to people and damage to property arising from the building work.
JCT Minor Works Contract (2016 Edition)
The JCT minor works contract is the most common building contract in use for building projects and renovations. The JCT minor works contract is used for works that are small, non-complex and up to a contract value of around £500,000.
Insurance Options
The following options are available to choose from in the JCT minor works contract;
JCT 5.4A – this requires the Employer to be included as a “Joint Name” with the Contractor on the insurance policy for the new works.
JCT 5.4B – this requires the Employer to provide “Joint Names” insurance policy for the new works and the existing structure.
JCT 5.4C – this requires the works and existing structure to be insured by ‘other means’.
Which option should I choose?
This will depend on the project, however if there is an existing structure clause 5.4B is likely to be the best choice. This is because this covers both elements of existing property and new works under a comprehensive all risks policy with one insurer, which will ensure a smooth claims experience as two different insurers do not need to be involved.
Using this clause 5.4b also gives the Employer (Building Owner) control of the insurance policy, rather than relying on the policy of the Contractors. This means that in the instance of a disagreement, change or financial failure of the main builder or contractor, the full project value (existing structure and money invested in the works) is fully protected at all times. In addition clause 5.4b gives the Employer control of the information provided to insurers about the building works and can be confident that the full premium has been paid. Note that any insurance policy put in place by a Contractor would expire should they cease trading or walk away from the job.
Insurance for new builds where there is no existing structure to insure
If the works being undertaken are a new build then JCT clause 5.4A will be the most suitable. The JCT MW contract does not specify who is to provide or pay for the insurance policy needed to cover the works, however for all the reasons mentioned above the best solution is always for the Employer to provide the insurance. Some Building Contractor’s insurances can be extended to include a Joint Name, however this is often a “note of interest” and does not provide the employer with any right of control over the policy. Equally if the builder changes between different stages of the renovation project the work that has been completed will not be insured by anyone.
A final note of caution if you are thinking of relying on the contractors insurance cover; if there is a claim then it is the contractor who must submit this to insurers and it is the contractor who is entitled to any payout. If the contractor is in liquidation then the claims money would go into the creditors pot and only a proportion of what is left would be paid to you after all other liabilities have been met.
Should JCT insurance Clause 5.4A or JCT insurance Clause 5.4B not be suitable, JCT insurance option 5.4C is available. This clause should only be used if there is a good reason to do so – the other clauses should be flexible enough to cater most projects. This clause does not call for a “Joint Names” element, it is understood that the Employer can arrange buildings and works insurance in their own name, or the Employer can arrange buildings insurance and the Contract can arrange works insurance. The main reason this clause might be used is in cases where the existing structure is not insurable. For example work on an ancient monument or a building that is structurally unsound or exposed to the elements might make it impossible to insure the existing structure. If this clause is used the best position is for the Employer to insure both elements (structure and works) to ensure the most comprehensive cover.
The Scottish building contracts (SBCC) clauses are numbered 6.4a, 6.4b and 6.4c. The clause details are the same as above e.g. 6.4a is 5.4a etc.
How can I make an enquiry?
Call us on 01825 745410 and speak to a trained advisor to guide you through the form.
JCT Intermediate contract
The JCT intermediate contract is used for medium to large sized building and renovation projects where the contract value is likely to exceed £500,000 and the work itself is complex.
Insurance Options
The following options are available to choose from in the contract;
- Option A requires the Contractor to take out and maintain all risks insurance of the works;
- Option B requires the Employer to take out and maintain all risks insurance of the works; and
- Option C requires the Employer to take out and maintain (a) insurance in respect of the existing structures and their contents and (b) all risks insurance of the works.
What insurance option should I choose?
Much like the minor works contract, there are clauses in place for both new build and works on existing structures. Options A and B are suited towards new build projects. For the same reasons that the JCT clause 5.4B is most appropriate under the minor works contract under a JCT Intermediate Contract Option B will always provide the best protection for the project owner as this puts them in control.
Option C is almost identical to 5.4B of the minor works contract and is the only option available if there is already an existing structure in place. This carries the same benefits as JCT MW (2016) 5.4B.
How can I make an enquiry?
Call us on 01825 745410 and speak to a trained advisor to guide you through the form.
JCT Standard Building Contract
The standard building contract is designed for large and complex projects, with a contract value in excess of £1,000,000.
Insurance Options
The following options are available to choose from in the contract;
- Option A requires the Contractor to take out and maintain all risks insurance of the works;
- Option B requires the Employer to take out and maintain all risks insurance of the works; and
- Option C requires the Employer to take out and maintain (a) insurance in respect of the existing structures and their contents and (b) all risks insurance of the works.
Which Insurance option should I choose?
The insurance options for this contract are fairly much identical to the Intermediate contract and as such should be treated in the same manner.
Options A and B are suited towards new builds. Option B should be chosen given that this puts the Employer in control.
Option C is the only option available if there is already an existing structure in place.
How can I make an enquiry?
Call us on 01825 745410 and speak to a trained advisor to guide you through the form.
RIBA Domestic Building Contract
The RIBA contract is equivalent to the JCT Home Owner Occupier as it is used for light, non complex works. It does not contain insurance options, but instead lists the insurance requirements.
Insurance Options
The following is required;
Contractor’s Liability
6.2.1 Loss of or damage to the Works
6.2.2 Loss of or damage to the property
6.2.3 Loss of or damage to products and equipment
6.2.4 Death of or bodily harm to any person working for the Contractor, arising in connection with the Works during the course of their employment
6.2.5 death of or bodily harm to a third party caused by the carrying out of the Works
6.2.6 any other loss or damage that is not the liability of the Client
This calls for the Contractor to take out an insurance policy to cover the works, materials and equipment – this would normally be a Contractors All Risks Policy – and a policy to cover third party property damage – a Public Liability Policy – and a policy to cover their employees for injury caused to them while working under their direction – Employers Liability Insurance. L
Client’s Liability
6.1.1 Damage to existing structures and fixtures
6.1.2 Damage to neighbouring property caused by the carrying out of the Works
This calls for the client to insure the existing structure to its full reinstatement value, as well as Non Negligence Insurance.
It will always be better for the property owner if a Joint Names requirement can be incorporated into this contract and, if so, should be treated akin to minor works clauses 5.4B where the Employer (referred to here as the Client) takes out a policy for both existing structure and new works in the joint name of the Contractor.
How can I make an enquiry?
Call us on 01825 745410 and speak to a trained advisor to guide you through the form.
Non Negligence Insurance
This insurance can be referred to many names; Party Wall Liability insurance, 21.2.1 insurance, 6.5.1 insurance or Non Negligence Insurance. This insurance may be a requirement in your building contract, or it may be recommended by your broker/architect/surveyor if you are undertaking works in close proximity or on a party wall (shared wall), near to adjoining properties or businesses – for example a tennis or swimming club where the courts or pool adjoin or are located near to where the works you are undertaking are located.
Non Negligence insurance covers any expense, liability, loss, claim or proceedings which you may incur or sustain by reason of injury of any person or damage to any property, where negligence by the contractor and/or any sub-contractors cannot be clearly established, happening during the period of insurance and caused by:
– collapse;
– subsidence;
– heave;
– vibration;
– weakening or removal of support;
– lowering of ground water;
and arising out of, in the course of, or by reason of the carrying out of the contract works.
In plain English this means that if the works that you are undertaking cause loss or damage to others in the vicinity caused by collapse, subsidence, heave, vibration, weakening or removal of support or lowering of ground water and the possibility of this damage could not have been anticipated by the experts or was not the fault of the workmen, then a claim can be made under this policy.
Non Negligence insurance does not cover damage which can reasonably be foreseen to be inevitable, having regard to the nature of the work to be executed or the manner of its execution. It would not for example cover the cost of repairing cracks in a neighbouring property which result from the build, but it would cover the collapse of a neighbours ceiling due to vibration, even if this happens a few months after work is completed, if the ceiling had been inspected prior to the work taking place and was not at that time thought to be vulnerable to damage during the build.
The Contractor or the Employer can take out this insurance, however in the end it is solely there for the benefit of the Employer, and as such would recommend they be the one to take this out.
TOP TIP: In order to make a successful Non Negligence claim, Insurers will expect a schedule of condition to be drawn up which shows the condition of you and your neighbours properties before the works are undertaken. This should contain pictures and note any pre existing damage. This document is essential in a claims situation because the onus is on you as the property owner to prove that the damage that is being claimed for was caused as a result of the carrying out of the works, and was not pre existing or foreseeable. You may struggle to make a claim if you do not have reasonable evidence of condition from an expert (building engineer or surveyor or party wall surveyor) that was collated prior to the work commencing.
How can I make an enquiry?
Call us on 01825 745410 and speak to a trained advisor to guide you through the form.