Construction Insurance Glossary

Provides coverage where you can remove selected exclusions existing in your current wording.

Exclusions that can be removed are:

• Section 1 Material Damage
  • Breakdown of electrical and mechanical machinery
  • Defective design, materials or workmanship
  • Loss discovered by inventory
  • Loss of currency, cheques, files or other paper records.
  • Directional drilling
  • Wear and tear, corrosion or gradual deterioration
     
• Section 2 Liability
  • Loss of use of property not physically damaged
  • Damage to the actual “product” (where there is cover for the products)
     

Claim Example

Jeff, a builder in a small construction firm, completed laying a concrete slab for a commercial building. The slab, which was worth $80,000, was found to have cracks across it. Jeff assumed that the cracks were probably the result of either defective workmanship, materials or specification, which weren’t covered by his insurance policy, so he decided not to submit a claim. Jeff and his team then removed the slab and checked the original specification criteria, then re-laid the slab.

Again, the slab formed a substantial number of cracks after it was completed. The cracking meant that Jeff was set to lose another $80,000 – a total of $160,000. However, this time, Jeff submitted a claim to the insurer. Jeff’s claim was investigated, and the cause of the cracking both times was found to be concrete supplied by the batching plant, which was not to specification. This normally wouldn’t be covered by construction policies, which exclude defective materials, workmanship or design.

However, Jeff had the Defective Design, Material and Faulty Workmanship writeback endorsement clause option and the defective materials, workmanship or design exclusion was removed. This meant that Jeff only had to pay an excess of $15,000 for each loss, claiming the remaining $65,000 for each loss event – a total of $130,000. Without this endorsement, Jeff’s claim would have been denied – as it would under many other policies on the market

Covering completed structures whilst being used as a display home

Earthworks collapse due to design, or excluded weather perils are standard construction policy exclusions. You can provide this coverage (write-back) by covering costs for retention, AICOW and moisture reduction in stockpiled soils when excavation sides collapse caused by weather and/or design faults.

Insured

• The cost of reducing moisture in stockpiled material caused by the weather
• If you’re underway with construction works and weather or defective design results in earth movement such as landslip, subsidence, collapse or displacement, the cost of: Ÿ replacing insured material Ÿ constructing a support and retention system Ÿ temporarily stabilising the area and removing it when required
• Increased costs of working.

Not Insured

• Increased salaried staff costs.
• Claims where you were responsible for the earthworks design
• Loss or damage you are not contractually liable to remediate.
• Claim amounts in excess of $50,000 or 10% of the project’s value