What this contract asks your client to insure
Every line quotes the contract and gives its page. Click a page number to see the clause.
- FORM ·
- NEC4 Engineering and Construction Contract, Option A
- June 2017, with amendments January 2019
- CLIENT ·
- UK Research and Innovation
- Contractor named in Part Two, p14
- WORKS ·
- Design, supply and installation of a borehole array with ground source heat pumps
- Includes civil engineering and landscape works
- CONTRACT PRICE ·
- £1,811,159.39
- Tendered total of the Prices, ex VAT
- DATES ·
- Starts 8 Jan 2024. Completion 3 May or 31 May 2024
- Then a 52 week defects period
- OPTIONS ·
- X2 X5 X11 X16 X18 X21 Y(UK)2
- X15 (contractor's design) not used
WHAT THE CONTRACT ASKS FOR
| COVER | MINIMUM | BASIS | PAGE |
|---|---|---|---|
| Third party liabilityDamage to property other than the works, injury to anyone not employed by the contractor | £10,000,000 | Any one event | |
| Employers' liability | £10,000,000 | Any one event | |
| Public liabilityListed again as an extra insurance | £10,000,000 | Not stated | |
| Product liability | £10,000,000 | Not stated | |
| Contract worksThe works, Plant and Materials. No client-supplied materials to add (N/A) | Replacement cost | NEC4 standard insurance table | |
| Contractor's equipment | Replacement cost | NEC4 standard insurance table | core |
| Professional indemnity | Not required | X15 not used. See flag 1 | |
| Limits on excesses | None set | Deductibles left blank |
"Core" means NEC4's standard clauses, which are not printed in this document. They also require these insurances in joint names (employers' liability aside) and keep them in force until the Defects Certificate is issued.
WHAT COULD CATCH YOUR CLIENT OUT
1 · ACTDesign liability, but no PI asked for
"Design, supply, installation, testing & commissioning of a bore hole array along with Ground Source Heat Pumps"
"X15: The Contractor’s design (NOT USED)"
"The Contractor’s liability for Defects due to its design which are not listed on the Defects Certificate is limited to £10,000,000"
"The end of liability date is 6 years after the Completion of the whole of the works"
Your client designs the system and can be liable for up to £10m of design defects for 6 years, yet the contract never asks for professional indemnity. Without X15, the design duty is likely to be meeting the Scope whatever the cause, which is wider than PI normally covers.
Do: confirm your client has design and construct PI running to 6 years after Completion. Ask whether X15 should apply. The strict duty point is for the client's solicitor.
2 · CHECK£10m products cover, basis not stated
"Insurance against Product Liability. Minimum amount of cover is £10,000,000"
The extra insurances on p7 give a figure but not "any one event" or "aggregate". Products cover is usually sold in the aggregate for the year.
Do: get UKRI to confirm an aggregate limit is acceptable before the certificate goes in.
3 · CHECKTwo different completion dates
"The completion date for the whole of the works is 03/05/2024"
"The completion date for the whole of the works 31/05/2024"
The client's part says 3 May, the contractor's part says 31 May. Cover has to last until the Defects Certificate, which comes 52 weeks after Completion.
Do: confirm which date applies and make sure the contract works cover runs to the later one, plus the defects period.
4 · CHECKExtra conditions not included
"Z2, Z4, Z5, Z7, Z10, Z13, Z14, Z22, Z22, Z44"
Ten additional conditions are listed (Z22 twice), but their wording is not in this document. Z clauses often rewrite insurance and liability terms.
Do: ask for the full Z clause wording and run the check again.
5 · CHECKOne page could not be read
PDF page 8 is an image with no readable text, so nothing on it has been checked.
Do: look at page 8 by eye.
GAP CHECK
Example only: made-up cover typed in to show how the gap check works. Not the contractor's real insurance.
| COVER | CONTRACT NEEDS | CLIENT HAS | RESULT |
|---|---|---|---|
| Third party liability | £10m | £5m | SHORT £5m |
| Employers' liability | £10m | £10m | OK |
| Product liability | £10m | £5m | SHORT £5m |
| Contract works | £1.81m+ | Not given | CHECK SUM INSURED |
| Professional indemnity | Not required | Not given | RISK · FLAG 1 |
POINTS TO RAISE, READY TO PASTE
- Can you confirm whether Option X15 should apply to our client's design, and what PI limit and run-off period you expect?
- Can you confirm the £10m product liability may be on an aggregate basis?
- Please send the full wording of the additional conditions (Z2 to Z44).
- Which completion date applies: 3 May 2024 or 31 May 2024?