1. Property insurance
The main difference between the insurance policies already discussed in this series and Section 1 of the ACR insurance is that the latter is property insurance.
This means that damage to the insured property is covered and there is no question of liability for the damage. The purpose of ACR insurance is to ensure that the damage can be repaired quickly, without disputes between the parties.
2. Policyholder
The insurance should ideally be taken out by the building client. After all, they have the best overview of the works to be carried out, and are familiar with all the agreements. This is important, because the client can ensure that the works of all contractors and designers are covered by the ACR insurance.
Are all works, in particular the architect’s and engineer’s fees, also included in the insurance taken out by the (main) contractor? Has the premium been paid? Who will compensation be paid out to by the ACR insurance company? These are all elements the client should keep control over, or at least keep a close eye on.
3. Insured works
An accurate description of the works is essential.
Works that are not specified will obviously not be insured, nor will the contractor performing them.
It goes without saying that special techniques such as shoring works, groundwater level reduction, etc. are crucial information. Providing a full set of studies and plans avoids subsequent disputes with the insurance company over whether or not they were correctly informed.
The insurance must always be taken out before the work starts. If the work has already started, many insurance companies will no longer be willing to provide insurance, or will only do so subject to conditions relating to the (impact of) work already carried out. Such conditions undermine the whole point of ACR insurance, which is to ensure a swift settlement of claims without any dispute regarding liability.
It is also important to note that the ACR insurance ends at the moment of provisional acceptance, the start of use or commissioning, or, in any event, at the end of the term specified in the insurance policy. If there is a delay in the execution of the works, the ACR policy must therefore be extended. Bear in mind that when taking out the policy, you can already arrange for such an extension, including the premium to be paid. It will be reassuring to have already had this discussion if the project subsequently turns out to be a ‘problem site’. On the other hand, when negotiating, also bear in mind that even if there is a delay in the execution of the works, a part has already been carried out. A simple additional premium calculated pro rata on the price of the initial works is not a correct estimate of the risk still to be insured at that point.
4. Insured parties
As ACR insurance is intended to be property insurance, the following parties fall under the term “insured parties”, provided that the works carried out by them are described in the policy and the value of these works is included in the policy:
- the client;
- the main contractor;
- the subcontractors working on the site;
- the ancillary contractors;
- the design offices and architects;
The major advantage of this is that it eliminates the need for discussions regarding liability among the various construction partners. Damage to the works is, in principle, compensated directly. Each insured party has their own direct claim against the insurance company, and the latter has no right of recourse against any of its insured parties.
A contractor who has had materials stolen from the site will receive direct compensation from the insurance company, even if another insured party failed to secure the site properly. In principle, the insurance company will not be able to seek recourse against the latter party either.
5. Insurable property
Under the absolute basic policy, the structures are insured, specifically the project itself, the “assets to be built”, comprising, on the one hand, the building materials and components and, on the other hand, the equipment.
The building materials relate to the construction, the creation of a building as a solid structure through the installation and processing of materials from the foundations to the roof, from the floors to the painting works.
The equipment comprises machinery, appliances, and installations, including everything related to HVAC, electricity, plumbing, kitchens, and solar panels.
In addition, the following can also be insured:
- temporary structures (e.g. soldier pile wall)
- existing assets, particularly in the case of renovations
- site huts
- construction site materials and equipment (e.g. fencing)
- construction site machinery (e.g. cranes)
The choices depend on the specific project. A scaffold is not an “asset to be built” but can be insured in case it blows over.
Demolition works are also not “assets to be built”. This is therefore not insured unless expressly included in the special conditions.
6. Damage
Any damage, destruction or loss of the insured goods is covered by the insurance.
The work must actually be damaged. ACR insurance is not a quality guarantee. Only damage is compensated. A wall built in a half-brick pattern while the specifications stipulated a full-brick pattern is not a damaged wall. The ACR insurance will not provide cover for rebuilding this wall.
7. Construction period / maintenance period
In principle, it is possible to take out ACR insurance solely for works performed up to provisional acceptance. This period is referred to as the construction period. In practice, this almost never happens, and insurance is also taken out for the period between provisional acceptance and final acceptance. This period is known as the maintenance period and is usually set at one year.
During the maintenance period, damage caused during acceptance checks on works that have already been definitively completed is insured (basic maintenance).
8. Extensive but limited cover
The final conclusion is that the ACR policy offers extensive cover. In particular, the fact that it helps to avoid disputes between the various construction partners regarding liability for a damage claim is a significant advantage that should not be underestimated.
But we must temper our enthusiasm. In practice, a number of common damage claims do appear to fall outside this basic cover.
A faulty design is not work carried out on site; materials supplied may arrive defective from the factory; hidden defects are not covered, etc.
The ACR insurance company will therefore not provide any cover for this damage.
Good negotiation and tailoring the policy to your specific needs is essential.
On that topic, take a look at the next part in our series.
