It is critical to use the right insurance clause within the JCT contract to make your insurance really work for you. This section can be used as guidance for you and your professionals in making the right choice.
It is important to select the correct insurance clause to make sure that it dovetails with your insurance contracts so that cover is not jeopardised.
Homeowner contract
A JCT homeowner contract makes little reference to insurance other than stating that both parties should make sure that they have the appropriate insurance in place.
In the context of a minor alteration to a property you should advise your insurer that you are having works undertaken and to what value. It is likely that your standard household policy will cover your home while these works are being undertaken because most household insurance provides cover for construction contracts under £50,000.
You should check that the contractor you have appointed has sufficient and adequate public liability, employers’ liability and contract works insurance to cover the works that he or she is undertaking prior to the practical completion of the project.
A JCT homeowner contract makes little reference to insurance other than stating that both parties should make sure that they have the appropriate insurance in place.
In real terms, this means that you will be responsible for insuring the existing structure and the contractor will be responsible for insuring all of the works until they are finished, along with liability to third parties and employees.
Minor works contract
The minor works contract has its own specific clauses within section 5 page 26 to headed injury, damage and insurance.
This section deals with:
- the liability of the contractor for personal injury or death
- the liability of the contractor for injury or damage to property
- the contractor’s insurance of his liability for the insurance of the works and the existing structure by either party
- evidence of insurance
In times gone by, the insurance industry, for reasons of subrogation, preferred the employer to insure the existing structure and the contractor to insure the works. This led to a disparity in cover between the two types of insurance and in some cases, legal disputes over how claims should be settled.
Nowadays, insurance has become more sophisticated and is able to deal with cover for the existing structures and works under one policy and against all risks.
When arriving at a minor works JCT contract you should select insurance clause 5.4b, which is the insurance of existing structures and works by the employer in the joint name of the employer and the contractor.
This has two effects:
Firstly, it makes sure that the existing structure and contract works are insured against all risks for their full reinstatement value.
Secondly, that the insurer is unable to subrogate against the contractor or avoid the policy should a claim occur. There is specific protection for you as the employer against a breach of a policy condition by the contractor, which means that your claim should always be met.
When arriving at a minor works JCT contract you should select insurance clause 5.4b, which is the insurance of existing structures and works by the employer in the joint name of the employer and the contractor.
Using this clause also means that you remain in control of the insurance of your major asset and are not open to the vagaries of insurance contracts you do not understand, or non-payment by the contractor of their insurance contracts.
Intermediate works contract
This contract has specific clauses for injury, damage and insurance under section 6 page 54. As you might expect, all of the items covered in the minor works contract are also picked up here. It’s useful to note:
- The important clauses relating to property are held in item 6.7 a, b and c, set out in schedule 1 of the intermediate contract booklet.
- Sections 6.7 a and b are used in relation to new works only. However, insurance option c specifies insurance by the employer of existing structures and works in or extensions to them.
- This clause is the only one you should use where there is an existing structure involved in the contract and for this reason the insurance may only be held by the employer in joint names with the contractor.
Standard building contract
The standard form JCT mirrors the conditions of the intermediate works contract on page 67 in section 6, headed Injury, damage and insurance.
Again, clause 6.7 option should be used, which specifies the insurance of the works and the existing structure by the employer in joint names with the contractor.