Last edited 20 Oct 2020

Excepted risk

Insurance provides third-party protection against risks. Risks on construction projects can be significant, and so insurance is very common, providing protection both for the insured, and for the party to whom the insured has a liability.

Many standard forms of construction contract include a requirement for insurance to be taken out by the parties to the contract. Policies may be taken out by the contractor or by the client depending on the form of contract and the options selected, but they will generally be in the form of a ‘joint names policy’ in the names of both the contractor and the client. This gives both parties their own rights to claim against the insurer. Other parties, such as funders may also be added as a joint name.

Insurance policies may cover all risks, or may be restricted to certain ‘specified perils.’ However, in either case, there may be ‘excepted risks’, for which insurance is not required (because it will usually be unobtainable).

Excepted risks might include:

The use or occupation of the works by the employer, its agents, servants or contractors.
Any fault, defect, error or omission in the design of the works (other than design provided by the contractor).
Riot, war, invasion, act of foreign enemies or hostilities.
Civil war, rebellion, revolution, insurrection or military or usurped power (not including terrorism).
Radiation or contamination by radioactivity.
Pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds.

The cost of rectifying damage caused by such risks is generally borne by the employer, although there is usually provision for the apportionment of rectification costs where the cause is contributed to by both an excepted risk and one for which the contractor is responsible.