One of the questions clients do not bring up, and which we have probably not dealt with much over the last 30+ years, is: “What insurance do you have as a company?”
I am not sure if clients are scared to ask this question, are uninformed about this responsibility, or prefer not to ask in the hope that it will all go well! (Scary!) For us, it has gone well most of the time, HOWEVER, you do not want to be that one client that it does go wrong for! You do need to pose this question to your contractor to get clarity, because in NZ, you are legally responsible for some of the cover!
Without confusing anyone, I’ll keep it short and say that with a Residential Project, cover usually needs to be arranged by the client with their current Insurance, who would want to be informed if you are going to build. There is a distinction that needs to be made between whether it is a structural or non-structural build. If it’s structural, responsibility may change, but it can also stay the responsibility of the builder, on arrangement. (Refer to this article for more information).
A client should also ask their contractor about additional cover, as it can only hold benefits. Builders typically only take out the bare minimum of cover for on-site related work, which means if anything else goes wrong that is not site related, they would not be covered. We agree that the biggest chance of something going wrong is on-site, but ironically, this is the only insured component that actually has a backup system in place (or should have), called Health and Safety. None of the other risks i’ll mention below have sufficient back up, which should make it very clear that you are very much at risk in the other areas, and more than you may think!
With the above said, let’s then look at what else is left that could go wrong and needs to be considered and although some may say these risks are smaller, the fact is they do exist and they can happen! For example, cyber-attacks, negligence (directors’ or company), an omission against the law (statutory liability), being only a few examples of things that can go wrong. Thinking about the access to personal information and breaches we deal with these days with cyber-attacks, how strict laws has become and how often they change that can cause omissions and these are only two examples, we cannot ignore that some of these insurance covers has actually become really important! These types of covers do not cost an arm and a leg, so why not be insured for the other percentage of risks at hand, that is not site works?
Here are a few examples of “extra” cover that can be taken with Contract Works cover which covers the on-site related work as said: (These are not exhaustive, but they should help broaden your understanding on this subject):
–Directors’ and officers’ liability insurance (often called D&O insurance) is designed to protect
directors, officers and employees involved in the management of a company, from personal
loss resulting from legal claims made against them, while they perform duties on behalf of the
company.
–Statutory liability insurance ensures that if a contractor breaches legislation they won’t be
financially burdened by the resulting fine, which can be significant. Additionally, if the
contractor is prosecuted under that legislation, they won’t need to bear the significant legal
defence costs and, in some instances, (especially with smaller companies), help them to keep
afloat which in turns will help the client keep their Warranty in place.
–Crime insurance reimburses the organisation for loss of money, securities, or other property (for example stock or business equipment) due to the dishonesty of either employees or outside third parties. Once again, although this looks like a direct risk/loss only for the company, in effect, it will also influence clients in different ways and stages, depending on where their project is at.
–Criminal defense expenses insurance provides cover for costs incurred in legal disputes brought against you, company officers and employers. Legal expenses cover is usually offered as an extension to liability insurance.
–Cyber insurance can help businesses manage and recover from a cyber liability such as ransomware, a virus, malware infection, DDoS (denial of service) attack, or loss of data and privacy breach. Policies can cover business income loss and help minimise reputational damage after you’ve experienced an attack and assist at the same time in the instance where client data has been compromised!
At Retro Construction, we have these extra covers in place. It’s great to know we can limit the
risk not only for ourselves, but also for our clients and at least to the point of what an insurance
company is willing to pay for. A person would still need to deal with the “what they don’t cover”,
therefore i see having these covers in place is sometimes still not enough, but at least you have
done what you can! It is not a matter of choice, but rather a must so you can limit risks as far as
you possible or only to the small print of these policies, taking further risk upon yourself.
Insurance is sadly, too often just seen as a side task!
We trust this information will be an eye opener for some when starting a building
project! For a quotation, please feel free to contact us
