The COVID-19 outbreak brought with it significant business disruption for the UK construction industry, with a marked downturn in workloads and activity across all regions in the first quarter of 2020. We examine the key challenges and risks the industry is facing today.
Construction Insurance

When the Government imposed the lockdown in March 2020, non-essential construction projects were suspended in the UK and Ireland, with little notice to down tools. While this caused severe disruption, the industry however was one of the first to resume business as the lockdown eased.

While construction has generally been able to continue, many projects have been delayed largely due to supply chain issues, while others have been put on hold. In some cases this had led to thin margins being eroded in what has historically been a volatile industry. With construction resuming, companies are navigating a new landscape, both in the way they must work and the risks they need to mitigate.

Reconstructing the industry

Construction companies are having to consider what the future of the industry will look like. As lockdown continues to ease, housebuilding is still in high demand and there appears to be a slight upturn in the housing market as people seek to complete the moving process post-lockdown or reassess their required living space or location.

For commercial office buildings however, we may see a move away from traditional office space and towards remodelled offices to comply with new guidelines on social distancing and the safe use of space as employees return to the physical workplace.

Because of this ‘new normal’, the sector will likely continue to use Building Information Modelling (BIM) technology, for example in cases where clients are unable to meet with designers face to face, while the use of drones on construction sites will probably increase, particularly on complex sites which involve multiple contractors and sub-contractors. This may also help with assessment for the preparation of a return to work for those on site.

COVID-safe working arrangements and productivity

The new health and safety guidelines that have come into play since the arrival of COVID-19 have inevitably had an effect for companies due to the restricted working arrangements. According to the Construction Leadership Council, the unprecedented nature of the pandemic is affecting the progress and productivity of existing and future contracts1 meaning that the information relied upon to create estimates may no longer be reliable.

To help contractors ascertain and asses project risks and viability, the CLC has launched a toolkit2 to help them forecast site costs now that these new ‘COVID-safe’ working arrangements are in place. A standard methodology sets out the cost implications of restricted working, allowing clients to compare project costs against previous expectations. This may be one way forward for clients as they make informed investment decisions.

Employers’ liability and mitigating risk to your workforce

During the initial COVID-19 outbreak, there was a risk that construction workers and other employees on site could have been exposed to the virus in the course of their employment, either before lockdown or while working on sites that did not shut down. There is also concern from employers and employees as workers return, with questions around mitigating risk to individuals.

Insurers cannot impose restrictions on the first £5m of Employers’ Liability cover therefore cannot exclude communicable disease. As long as the employer can demonstrate that they have taken reasonable steps to discharge their duty of care and have documented to such effect, proving causation of an infection to employees is likely to be difficult.

As well as the more obvious issues of protecting employees through the use of PPE and other health and safety measures, there is also the impact of reduced staff to consider. For those left to ‘hold the fort’ there could be an impact on psychological and physical wellbeing, while for others who may be working from home, inadequate work stations could lead to problems such as musculo-skeletal issues.

Third party liability – injury and property claims

Third party injury claims may prove to be equally complicated as, again, it may be difficult to prove or disprove where and when a visitor may have contracted COVID-19. If PPE is supplied and guidelines are in place for meeting members of the public or other third parties, policyholders must be able to demonstrate that they have taken all necessary precautions to prevent the spread of infection.

It should also be noted that any serious third party liability injury claims may be impacted during rehabilitation due to delays in treatment caused by the ongoing pandemic, which may have a knock-on effect on costs.

With regard to property claims, one area of concern that has been highlighted recently is the increased use of modular construction, in particular Cross-laminated timber (CLT). This type of construction is far less labour intensive making it easier for workers to achieve social distancing. Off-site factories and contractors were still producing prefabricated buildings while many traditional construction sites were shut down3, meaning that in the case of a local or national lockdown, this kind of construction may be able to continue.

However, whilst CLT is a cheaper and safer form of construction, it doesn’t come without its risks with regards to fire safety, and there has been a recent spate of high profile fires where this kind of construction has been used.

Changes to wordings for third party liability policies

Insurers are looking to impose exclusionary language onto third party liability policies relating to COVID-19 or even more broadly communicable diseases. This means that it will be necessary to diligently review wordings from markets to understand why insurers are using certain exclusionary language. It may have been driven by treaty reinsurance, in which it may be necessary to determine if the insurer has underwritten the exposure. It is likely that there will be a requirement for COVID-related questions to be completed as to how an insured is managing the exposure.

To learn more about how our specialist teams can help you to manage and transfer the risks resulting from COVID-19, please contact us.


This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as at 01.12.2020, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher.