Before breaking ground, you have probably already reported to us and purchased contractors' insurance. But have you noticed the subtleties in the contractor's insurance policy, especially the section that requires you to report (in certain cases - immediately) to us or the insurance company - about changes to the project?
You are a busy person, so I assume not. Well, this content is mandatory content to read and implement because behind it is the obligation to report changes in the project such as: approval of a change in the urban plan or a construction addition, a change in the value of the project during the insurance period, a change in the scope and manner of execution of the project, a change in safety conditions or in the methods of maintaining the site, and so on.
There Are Both Risks and Financial Matters:
On one hand Failure to report changes in the works can lead to a situation where the execution of additions or changes to the project is carried out without insurance coverage, with implications for the insurance coverage for the project as a whole. This means: The risks and expenses fall on you.
On the other hand Not every change in the project is an addition of works. In quite a few cases, the scope of the original project is reduced due to budget issues, delays from the client, permit problems, or simply changes in plans. This means: You deserve a refund.
For more information, we recommend reading:
Obligation to report material changes in the project and the insurance and financial implications
Add a Title
Add a Title
Basic Definitions for Changes in Construction Projects
1. Insurance Amount - A contractor insurance policy must be appropriate for the full cost of the completed project according to the value at the time of insurance arrangement, including changes that will occur in its value during the insurance period for any reason. Has the project scope expanded? - It's your duty to update so that you're insured. Has the project scope been reduced? - Update, you likely deserve a refund.
2. Project Nature - Construction work often begins according to a building permit for a specific project scope and nature, but in parallel to the on-site work, procedures are conducted with authorities for zoning changes, requests for exemptions to add floors or housing units, requests for exceptional use resulting in significant structural changes, requests for purpose changes, and so on. Upon receiving the amended permit - if significant changes occurred in the information provided to the insurance company regarding the nature and scope of the project, therefore, notification must be sent to the insurance company to allow them to reassess the risk.
3. Type of Works - If changes occurred in the project execution method, plans, excavation depth or size of automatic parking facility, addition of complex works or types of works with a high risk level that were not initially considered such as: crane work, heavy engineering equipment work, excavations, groundwater depression due to changes in excavation depth, and more. It's important to report and update the contractor works insurance policy regarding changes in the project execution method.
4. Project Duration - The contractor insurance you purchased is valid for the insurance period specified in it. If there is a slowdown in construction work causing a deviation from the specified period - you must report and update the insurance period. Usually, extending the insurance period involves a payment determined by the execution duration and claims status.
5. Value of Materials Supplied by the Client - The insurance amount for the works must include the full cost of materials or items, equipment and works - supplied by the project client for the purpose of project execution. A common mistake by many contractors stems from ignoring, when determining the project value for insurance, construction inputs and/or works performed by a supplier or contractor on behalf of the client in the project.
If you are the main contractor and by virtue of the agreement with the client, you are obligated to arrange the contractor works insurance - make sure to include in the insurance amount the materials, inputs and works of contractors on behalf of the client, and in parallel - charge the client for the insurance cost differences.
How to Achieve Maximum Insurance Coverage at a Reasonable Cost
Here are important points to remember especially regarding insurance coverage and its cost: There's no such thing as a uniform contractor insurance policy. Each project has its own complexity and special characteristics. Accordingly, the insurance policy should address each component of the works in order to achieve the maximum extensions and protections you need.
We're not alone in this battle. The insurance company also legitimately has its own considerations and its risk analysis and control system for the risks it's asked to take on. This is also where the exclusions, requirements, and reservations that the insurance company will want to include in your contractor insurance policy are born.
The 35 years of experience we've accumulated have taught us how to develop creative solutions for properly handling project insurance, and within them to concentrate and provide the insurance company with accurate and detailed information that balances probability and risk and reduces the insurance company's concerns about taking unnecessary risks and ultimately – enables giving you better terms – both in terms of cost and in terms of insurance coverage.
Construction work is a dynamic matter that is in constant motion and often subject to external factors: weather, accidents, changes in construction plans, budget changes, and so on. But we are now dealing with the topic of the obligation to update and report, therefore one of the important added values we provide you is our availability and professional guidance throughout the project execution period – and after it. The guidance includes: both consulting and direction regarding the contractor insurance policy and its adaptation to the existing reality at the construction site, and also during an insurance event, activating a team of insurance experts in the construction industry who know how to help you cope well and exhaust your rights.
The 'quality' of your insurance policy. All the advantages and unique services we've listed so far and many others haven't escaped the notice of underwriters and insurance companies. These are willing to accommodate us, both in costs and in expanding the insurance, because over the years they've come to recognize our integrity and professionalism, and appreciate the complete information we lay before them.
The method of reporting and its significance
According to the terms of the policy - you are required to report in writing to the insurance company regarding a material change in the work as detailed above.
Here, our recommendation is not to act on your own but in coordination with our office. The manner of reporting should be measured and meticulous, often general information that is carelessly transmitted may create unnecessary difficulties that would have been avoided in the first place if the report had been reviewed and well-worded. Furthermore, in order for the insurance supplement – in the case of project expansion – to provide you with the optimal insurance coverage at the minimum possible cost, it is sometimes necessary to perform preparatory work, surveys (such as a building documentation survey), or field operations in order to reduce the risk that the insurance company is asked to take on and, as a result: reduce the cost of the supplement, and avoid as much as possible the exclusions or protection/safety requirements that the insurance company may impose as a condition for insurance coverage.
In conclusion
The insurance of the contracting work does not end after the purchase of the insurance.
Changes in the insurance amount, the nature of the project, the type of work, the duration of the execution, and the value of materials supplied by the client - all of these require attention and are subject to reporting to the insurance company.
Product liability insurance
You've completed a construction project, handed over the keys, and you can congratulate yourself on the finished product. But your liability for third-party damages resulting from construction defects continues - and this is where the importance of product liability insurance comes into play...
Important articles worth reading
