The nature of construction work presents a range of risks across all phases of a project, from design to completion. Whether it’s inadequate planning or design, changes to the scope of the project, errors & omissions, or due to unexpected delays and disruption such as a fire or flood on the site, there are plenty of opportunities for a claims scenario to arise.
Expectations and goals of clients, contractors and sub-contractors can vary, raising the potential for conflicts and disputes. With numerous parties involved in any one project and the actual cause and who is responsible for it often disputed, a claim can quickly become complex and take many months or even years to fully resolve. Furthermore, negotiations can often become fraught, with all parties trying to protect their position, meaning that an amicable resolution can rapidly become impossible.
Reducing the risk of an insurance claim
With the current, challenging insurance market, insurers may be reluctant to underwrite certain risks. This is placing increased pressure on construction companies to ensure their insurance covers all the necessary bases throughout the entire project lifecycle and on a workable cost basis.
Steps you can take now
Performing a site investigation is strongly recommended before commencing a project, looking at things such as soil conditions, ground water, slope stability and contamination of land. Many problems encountered on construction projects are due to unforeseen ground conditions. Therefore, by carrying out a thorough site investigation you can mitigate a section of risk before the project starts.
Regularly reviewing your risk management processes and protocols may also pay dividends longer term. For example, are you complying with the required legislation? Are your health and safety procedures up to date, including the necessary training? To put this into perspective, RIDDOR’s 2019/20 statistics show there were 40 fatal injuries to workers and 4 to members of the public, with the fatal injury rate in construction almost four times the ‘all industry’ ratei.
A proactive approach to managing risk can help control your incident rate and reduce the likelihood of claims being made against your company. Focusing on areas such as worker and public safety, quality control, liability under contract, and your environmental responsibilities can all help to strengthen your risk management and lower your claim risk.
Disputes and liability
Unlike other business sectors, the first step for a construction claim is to refer to the contract to establish who is responsible. In many cases the principal contractor must accept liability, even if a sub-contractor was at fault. Over 60% of respondents to a recent survey by Arcadis stated that proper contract administration would have the single largest impact in avoiding disputes in which they were involvedii, emphasising the need for greater clarity in contracts.
Remember, any liability claim can affect your claims history whether you were at fault, or not. Taking the time to review the contractual agreement will establish upfront where the liability rests and, most importantly, clarify whether the liability you are accepting under contract is covered by your insurance policy. Having a clear and detailed contract wording can mean the difference between a successful claims outcome or being faced with settling an unplanned legal bill.
Whatever the basis of a dispute, contract misunderstandings need to be ironed out and an agreement reached. Claims can often be avoided if there is a willingness to compromise.
The benefits of construction claims expertise
In the event of a claim, having the reassurance of hands-on support from your insurance broker throughout the process can make a difference.
Generally speaking, when a construction claim is lodged there are several parties involved, who may offer a different perspective on what happened and who is liable. This can lead to a lengthy legal process and escalating costs.
The question to ask upfront is whether you have the extra time and financial resources needed to deal with a complex claim. If claims are not managed directly by your insurance broker you may find yourself in a position of having to manage the claims conversations alone and grappling with making key decisions to determine the outcome.
There are a range of benefits of partnering with an insurance broker offering specialist construction claims expertise. Having access to an integrated claims team who keep you regularly updated on the status of your claim – bringing together a broker, loss adjuster, expert witnesses and lawyers – can offer a distinct advantage and help you reach the desired conclusion more efficiently. For example, a generalist loss adjuster may not fully appreciate the relationship between the contract, the policy and the incident, and may end up drawing an incomplete picture of the situation.
Gallagher’s approach to claims
With more than 200 claims specialists across the UK ready to assist clients in the event of a claim from day one, Gallagher can give you a head start on preparing the claim and submitting the necessary information from the outset.
In some cases we are authorised by insurers to settle claims on their behalf which can lead to a faster resolution. Other claims may be more complex and involve site visits and a lengthy negotiation process with insurers. Either way, early involvement in claims discussions offers an opportunity to promptly fact-check when information becomes available, and assists with presenting relevant and useful claims data to the insurer and other involved parties.
If a claim is made against you, we also review any supporting documentation and communicate what we believe to be the likely outcome on liability. We then present our findings and views to insurers so they are clear on the course of action, whether that is a quick settlement, robust defence or further enquiry.
All of this is underpinned by regular and effective communication with you and the insurer throughout the claims process. Our joined-up approach to claims helps achieve a resolution quickly, helping to minimise disruption to your business and reducing associated costs.
For an informal discussion about your current construction risk management arrangements, or to find out more about our claims service offering, please do not hesitate to get in touch.
CONDITIONS AND LIMITATIONS
This information is not intended to constitute any form of opinion nor specific guidance nor legal or financial advice, and recipients should not infer such from it or its content. Recipients should not rely exclusively on the information contained in the bulletin and should make decisions based on a full consideration of all available information. We make no warranties, express or implied, as to the accuracy, reliability or correctness of the information provided. Our advice to our clients is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. 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 and exclude liability for the statistical content to fullest extent permitted by law.
i. https://www.hse.gov.uk/Statistics/industry/construction.pdf
ii. https://www.arcadis.com/en-us/knowledge-hub/perspectives/global/global-construction-disputes-report
