Construction Insurance and UK Construction Contracts
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CHAPTER 23
Contract insurance under NEC3 (2013)
General
23.1 Currently, the NEC/ECC family of contracts comprises:- NEC3 Engineering and Construction Contract (ECC)1
- NEC3 Engineering and Construction Short Contract (ECSC)
- NEC3 Professional Services Contract (PSC)
- NEC3 Term Service Contract (TSC)
- NEC3 Term Service Short Contract (TSSC)
- NEC3 Supply Contract (SC)
- NEC3 Supply Short Contract (SSC)
- NEC3 Framework Contract (FC)
- (i) general;
- (ii) the contractor’s main responsibilities;
- (iii) time;
- (iv) testing and defects;
- (v) payment;
- (vi) compensation events;
- (vii) title;
- (viii) risks and insurance;
- (ix) disputes and termination.
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Relevant provisions in the contract
23.5
Clause 8 of the NEC3 deals with both risk and insurance together. Clearly, the intention is that the insurance taken out will be matched to the risks that exist. The relevant provisions are as follows:
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- Clauses 80/81 defines the matters for which the employer is responsible, with all other matters stated to be the responsibility of the contractor.
- Clause 82 imposes an obligation upon the contractor to promptly replace loss of and repairs damage to the works plant and material until the defects certificate has been issued.
- Clause 83 states each party shall indemnify the other against claims proceedings compensation and costs due to an event that is his risk with provision being made for apportionment in the event the other party contributed to the loss.
- Clause 84 requires the contractor to provide insurance in joint names in respect of the types of insurance specified.
- Clauses 85/86 require the contractor to provide copies of certificates of insurance before works commence and at each renewal; and requires policies to include a waiver of their subrogation rights against directors and employees of each insured. In the event the contractor does not take out the requisite insurance the employer is entitled to do so and the cost is borne by the contractor.
- Clause 87 addresses portions of policies and certificates of insurance where the employer insures. In the event the employer does not take out the requisite insurance the contractor is entitled to do so and the cost is borne by the employer.
Specific clauses
Clauses 80 and 81: Parties’ respective scope of responsibility
23.6 Reversing the approach adopted in the JCT contracts, NEC3 starts by identifying - in reality carving out - those risks that will be borne by the employer that are stated to be:- Claims, proceedings, compensation and costs payable which are due to:
- ◦ use or occupation of the site by the works 2 or for the purpose of the works which is the unavoidable result of the works;
- ◦negligence, breach of statutory duty or interference with any legal right by the employer or by any person employed or contracted to him except the contractor or
- ◦ a fault of the employer or a fault in his design.
- Loss of or damage to plant and materials supplied to the contractor by the employer or by others on the employer’s behalf until the contractor has received and accepted them
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Loss of or damage to the works, plant and materials due to:Page 305
- ◦ War, civil war, rebellion, revolution, insurrection, military or usurped power; º
- ◦ Strikes, riots and civil commotion not confined to the contractor’s employees; or
- ◦ Radioactive contamination
- Loss of or wear or damage to the parts of the works taken over by the employer except loss, wear or damage occurring before the issue of the defects certificate which is due to:
- ◦ a defect which existed at take over
- ◦ an event occurring before take over which was not itself an employer’s risk
- ◦ the activities of the contractor on site after take over
- Loss of or wear or damage to the works, and any equipment plant and materials retained on the site by the employer after a termination except loss wear or damage due to the activities of the contractor on the site after the termination.
- Additional risks stated in the contract data.
Clause 83 - indemnities
23.8 Clause 83 provides:83.1 Each Party indemnifies the other against claims, proceedings, compensation and costs due to an event which is at his risk. 83.2 The liability of each Party to indemnify the other is reduced if events at the other Party’s risk contributed to the claims, proceedings, compensation and costs. The reduction is in proportion to the extent that events which were at the other Party’s risk contributed, taking into account each party’s responsibilities under this contract.