Guide to JCT Contract Insurance

What is JCT contract insurance?

JCT Contract Insurance is a type of insurance that covers building projects that are guided by a JCT Contract. These contracts are essential for delivering successful building projects. They outline the key elements, including the responsibilities of both parties, associated costs and details regarding project specifications – all to ensure that everyone involved is on the same page!

The JCT insurance serves as protection for both the client and contractor, providing coverage for the work being done, the existing structure, and any liabilities that may arise during the construction project. This insurance is sometimes referred to by different names such as Homework’s Insurance, Site Specific Insurance, Renovation Insurance, Extension Insurance, JCT Insurance, or Residential Contract Works Insurance, but it all essentially refers to the same type of coverage.

What insurances are required as part of a JCT contract?

The insurance required as part of a JCT contract will depend on the specific terms and conditions of the contract, as well as local laws and regulations. However, some common insurance requirements in JCT contracts include:

• Employer’s Liability Insurance: This type of insurance covers the employer’s liability for injury or death to employees during the course of the construction project.
• Contractor’s All Risks Insurance (CAR): This type of insurance provides cover for physical loss or damage to the contractor’s plant, equipment, and materials during the course of the construction project.
• Public Liability Insurance: This type of insurance covers the contractor’s liability in respect of death or injury to third parties or damage to property.
• Professional Indemnity Insurance: This type of insurance covers the contractor’s liability in respect of professional errors or omissions made during the course of the construction project.
• Non-Negligent Liability Insurance: This type of insurance provides cover for the contractor’s liability in respect of damage to property, where the contractor is not at fault.

It’s important to note that the specific insurance requirements for a JCT contract will depend on the scope and nature of the construction project, as well as local laws and regulations. As a result, it’s always best to consult with an insurance broker to determine the insurance requirements for your specific project.

Who is Responsible?

Historically, the insurance industry in construction required the employer to insure the existing building during renovations and the contractor to insure the work performed. This resulted in numerous disputes over claim settlements.

To resolve these issues, JCT Contracts and JCT Insurance (also known as 6.5.1 Insurance) were introduced to the building industry. These standard forms of contracts, written in the joint names of both parties (the contractor and the employer), clearly outline the responsibilities and obligations of both parties during the construction project.

The following options are available to choose from in the contract;

• Option A requires the Contractor to take out and maintain all risks insurance of the works;
• Option B requires the Employer to take out and maintain all risks insurance of the works;
• Option C requires the Employer to take out and maintain (a) insurance in respect of the existing structures and their contents and (b) all risks insurance of the works.

What to consider when choosing insurance for your project

When choosing JCT insurance for a construction project, not only is it important to think about the specific T&C’s, but there are also several other factors that should be considered: 

1. Type of Coverage: Determine the type of insurance you need based on the specific risks involved in your project. For example, Contractors All Risk Insurance or Public Liability Insurance.
2. Policy Limits: Make sure the policy limits are sufficient to cover the cost of any potential losses or damages.
3. Deductibles: Consider the deductible amount, which is the portion of the loss that the policyholder is responsible for paying.
4. Exclusions: Read the policy carefully to understand what is excluded from coverage. Some policies may exclude certain types of losses, such as damage caused by earthquakes or terrorism.
5. Claims Process: Familiarize yourself with the process of making a claim under the policy, including time frames and requirements.
6. Reputation of the Insurer: Research the reputation and financial stability of the insurance company, to ensure that it has the ability to pay claims if necessary.
7. Cost: Compare the cost of different insurance policies, taking into account the coverage provided, policy limits, and deductibles. Choose an insurance policy that provides adequate coverage at an affordable cost.
8. Expert Advice: Consider seeking expert advice from a licensed insurance broker, who can help you evaluate your specific insurance needs and compare different policies.

Protecting against Non-Negligent Damage 

A common exclusion from Contractors’ All Risk Insurance is damage to neighbouring properties during building projects or renovations. Similarly, if negligence cannot be proven, any injury or damage to third parties will not be covered by Contractor’s Public Liability Insurance. This could result in significant expenses for the property owner in the event of a neighbouring property suffering subsidence after work is performed on their property and negligence cannot be proven.

To mitigate this risk, the Joint Contracts Tribunal Standard Buildings Contract (JCT) and clauses 21.2.1 and 6.5.1 offer a solution. 6.5.1 Insurance, also known as Non-Negligent Liability Insurance, is necessary for protecting against claims for non-negligent injury or damage to the property. This insurance is usually arranged by the contractor and issued in the joint names of the contractor and the employer. It covers expenses, liabilities, losses, claims or proceedings arising from non-negligent damage to the property due to collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of groundwater.

Other Products to Consider

When it comes to insuring building renovations or extensions, there are various different products available in the market. They are known by different names such as extension insurance, homework’s, and building renovations insurance, but essentially, they all provide a tailored, site-specific combined policy that can include the contract works, the existing structure, and liabilities.

One of the key benefits of these policies is that they can be tailored to the specific needs of each individual project. This means that you can ensure that you have comprehensive coverage for all aspects of your renovation or extension project, including the existing structure and any potential liabilities.

Another important feature of these policies is that they are generally non-renewable, but can be extended if necessary. This means that the policy will be specifically designed for the needs of your project, and will run for a specific period of time, typically ranging from three months to two years.

What are the risks associated with not having the correct cover?

Not having JCT Contracts and JCT Insurance can expose you to several risks in the construction industry, including:

• Financial Loss: Without proper insurance coverage, you may be responsible for paying the cost of any damages or losses incurred during the construction project, which can be significant.
• Legal Liabilities: Without JCT Contracts, there may be unclear definitions of responsibilities and liabilities, which can lead to disputes and potential legal action.
• Reputation Damage: Failing to have proper insurance coverage and contracts in place can damage your reputation and credibility in the construction industry.
• Delays and Interruptions: Without proper insurance coverage, claims for damages or losses may result in project delays and interruptions, which can affect your project timeline and budget.
• Third-Party Claims: Without JCT Insurance, you may not be protected against third-party claims, such as damage to neighbouring properties, which can result in financial losses and legal liabilities.

How to choose the right insurance cover for your project 

Choosing the right insurance cover for your construction project can be a complex and overwhelming process. With so many options available, it’s important to understand what you’re looking for and what type of coverage will best suit your needs.

That’s where Clarke Williams comes in – As a trusted insurance broker, we can help you navigate the complex world of insurance and choose the right coverage for your project. We have a dedicated specialist to construction insurance, who will offer a tailored service to provide you with guidance on the best way to secure the necessary coverage and ensure you have the protection you need.