Insurance is a vital and complex subject in any Project management. Firstly, the subject is very complex, and the policies that are in vogue are not simple to understand till we apply for any claim. There are many new guidelines, exclusions and terms and conditions which an average person cannot understand so easily. What we think as insured might not have been insured in the same way as we expect, due to specific terms and conditions which we might have missed out to read or could have misunderstood it or sometimes the claim may not be feasible due to certain CP not met.
So, it is always advisable to have a specialist in the team who shall overlook the insurance policies, how they are designed, the scope, the exclusions, the insurance values, etc. Even choosing the right insurance agency to cover insurance is a big subject to deal with.
Some of the critical insurance policies we should obtain are;
- Contractor All Risk policy
- Workmen Compensation Policy
- Equipment insurance (for hired equipment’s)
- Professional indemnity policy by consultants
- Third-Party Liability policy
- Business interruption policy
- Fire and Theft policy for non-project items
- Policy for force majeure events (If available internationally)
- Key Men insurance
- Directors & Officers Liability Cover
- Advance Loss of Profit (ALOP)
- Office fire insurance
- Theft & Fidelity guarantee and Professional Indemnity
In a perfect situation, 1-4 shall be taken by the GC & his sub vendors. The Client shall take a separate Third-party liability policy for all the projects at corporate level which will largely cover the business risks / claims by clients. So, 5-13 shall fall into Clients domain. Professional indemnity shall be taken by the Consultants.
Workmen Compensation Policy
The Contractor shall obtain and maintain during the entire period of contract including the defects liability period, a workmen (employees ) compensation policy covering all the workmen engaged by the Contractor for the project and for an amount not less than the actual wages being paid so such workmen. Such a policy shall name Phoenix as the principal therein, and Phoenix's interest shall be protected in such a policy. Further, the Contractor shall ensure that the nature of work being undertaken as per the contract terms including blasting (where required), work at heights and work with high tension power supply where involved shall specifically be declared to the insurers and recorded on the policy. Notwithstanding anything contained above, however, the Contractor undertakes to hold Phoenix harmless against any claims for workmen/ employees compensation for such workers including the costs of defence of any such actions against Phoenix.
Contractors Plant and Machinery
Phoenix assumes no responsibility for any loss or damage to the plant or equipment of the Contractor whether caused by the negligence, omission or act of Phoenix or otherwise and it shall be the responsibility of the Contractor to obtain adequate insurances to cover the same including any third party liabilities arising out of the use of such plant and equipment. The Contractor undertakes to hold Phoenix harmless in case of any action against Phoenix arising out of the use of such plant or equipment.
Rule 7.18
(Rule 7.18)Following best practices shall be followed for obtaining Insurance Policy for the Project
Projects Under GC
- In a perfect practice of project management, CAR policy should always be obtained by the General Contractor with guidance and inputs from the Client expert team.
- The scope of Insurance under GC, shall cover all the Sub Contractors/Vendors unless expressly stated otherwise. GC should involve the Client during insurance quote finalization, for terms and covers to be vetted before policy issuance.
- Excavation works if given to a separate Contractor, the CAR and other Insurances to be taken by the Excavation Contractor and copies submitted to the GC and Client for validation.
- Suppose any other vendor comes on board before the GC is finalized. In that case, the Vendor needs to obtain the relevant Insurance Policies for the contract value and Material value if supplied by the Client. Client to instruct the Vendor on the type and scope of policies before finalizing the contract.
- GC to include all the structures and their values in the main policies, if any such work has been commenced before them coming on board and has been insured by that particular Vendor for their contract value.
- GC to submit copies of all Insurance policies (GC's and Vendor's) for the Client to validate, before payment of the first bill.
- The insurance policies obtained shall cover the entire project period and subsequent extensions in period if any and shall not be for a value less than the contracted value.
Projects Without GC
- The CAR insurance to be part of Client's scope, wherein if any major sub-contractor intends to cover their works/assets, the same can be evaluated and decided by the Client. Excavation works to be insured by the sub-contractor and the policy copies to be submitted to the Client for evaluation.
- All other insurances like WC, CPM, Professional indemnity and any other relevant insurance covers (advised by Client) should be taken by the respective vendors/sub-contractors.
- The policies taken by the Vendors should be submitted for evaluation before payment of first bills.
Operational Policies for Completed projects
- Scope of Fire/IAR insurance would be under Phoenix till the associations are formed, or the buildings are sold out. Machinery to be insured if the AMC's or the warranty periods are expired.
- Service vendors to provide all insurances for their staff and equipment along with Professional Indemnity and CGL policies for our vetting.
- Facility Management shall take the responsibility of this policies. As Developer we need to make sure there are no gaps in between and we are also properly protected by tenant fit out works that might happen congruently.
Others
- Keep the cost of insurance as pass-through for Phoenix such that the GC doesn't cut corners to take a policy with many exclusions.
- We need to make sure that the shortage of approved claims is always to the Contractor's account. Suitable provisions should be included in the Contract towards this.
- The Contractor should be encouraged to claim on actuals and not artificially increase the claim amount.
- In case of any event resulting in a possible claim, the Contractor should be advised and encouraged to maintain all the relevant records, evidence and documents to corroborate the claim.
- Phoenix should take a parent Third Party Liability for all the projects with a value of about 25 cr for every million SFT being developed at any point. This shall be over and above the project specific TPL.
- There could be a requirement of an insurance policy to be submitted to the Municipal body when issuing approval. Since GC may not be on the board, Phoenix will have to take short term policy for one year (as per GHMC rules/directives) to comply with the approval authority requirements. The commercial department shall do the needful as GM office will not be functional at this stage.
- As part of the Commercial Department, the insurance specialist should take complete control over all the insurance matters and make sure all the Contractors follow the protocol and contractual terms and ensure no delays in renewing the policies.
- Standard Contractual clause for insurance should be legally vetted for gaps and included in the GCC contract template.