Last edited 30 Jun 2017

JCT 98 Contract Insurances

To help develop this article, click 'Edit this article' above.


[edit] JCT 98

[edit] Relevant Provisions in Main Contract

[edit] Clause 20 - Injury to persons and property and indemnity to employer

[edit] Clause 21 - Insurance against injury to persons and property

[edit] Clause 22 - Insurance of the works

[edit] Clause 22A - Erection of new buildings - all risks insurance of the works by the contractor



Failure of contractor to take out policy

Payment of insurance proceeds

Partial completion

  • employer takes responsibility of the works taken back

Site materials

  • all unfixed and goods delivered to, placed on, or adjacent to the works and intended for incorporation in them

[edit] Clause 22B - Erection of new buildings - all risks insurance of the works by the employer



  • as above

Failure of employer to take out policy

  • contractor can take out his own policy and increase the contract sum by the amount of premiums he has to pay.

Payment of insurance proceeds

[edit] Clause 22C - Insurance of existing structures - insurance of works in or extensions to existing structures

[edit] Clause 22D - Insurance for employer's loss of liquidated damages

[edit] Clause 22FC - Joint Fire Code compliance

[edit] Sub-Contractors

  • required to observe, perform and comply with the provisions or the main contract
  • indemnify the contractor against breaches by them of specific provisions in the main contract
  • required to carry and maintain insurance to cover its liabilities in respect of personal injury or death ensuing from work carried out by it


[edit] General

[edit] Contract Works Insurance

  • similar to JCT 98

[edit] Professional Indemnity Insurance: Design and Construct


[edit] Damage to Works

  • the indemnity may be the repair, reinstatement or replacement of any property lost or damaged, or a monetary payment of the same amount
  • the insured will be the employer and the main contractor, and possible sub-contractors
  • loss or damage are covered, subject to a number of exceptions
  • the property insured is described in the policy schedule
  • the loss or damage must occur during the currency of the policy
  • the cover only applies to the contract site

[edit] Cover

  • usually arranged on an annual basis by a contractor, thus covering all contracts
  • possible for cover to be arrange on a single contract basis but more expensive

[edit] Extensions to the policy


  • anywhere within the territorial limits
  • excludes sea and air transit (heavier risk)
  • excludes motor vehicles (insures under motor vehicle policy)
  • excludes employees tools (too many small claims)


Architects', Surveyors' and Consulting Engineers' fees

  • incurred in the reinstatement of the property insured consequent on its loss or damage

Removal of debris

Off-site storage

  • materials and goods whilst not on the site but intended for inclusion in any contract works covered by the policy

[edit] Exceptions to the policy


  • means of encouraging the contractor to take care and of
  • eliminating small claims

Post-completion risks

Existing Structure

Other exceptions

[edit] General Conditions

  • reasonable precautions
  • disclosure of material facts
  • adjustment of the premium
  • contribution - if there is another policy, the policy will not pay until the first policy has been exhausted
  • cancellation - insurer's, but not the insured, have the right to cancel

[edit] Claims Conditions

  • notify insurer within three months of any events that may give rise to a claim
  • refrain from repairs until the insurer has had time to inspect
  • notify and assist the police in case of theft, loss or wilful damage to property

[edit] CLAIMS

  • dealt with by loss adjusters


[edit] Employers and Public

[edit] Clause 21.2.1


[edit] General

  • ten-year non-cancellable policy to indemnify the insured against the cost of repairing defects in the design, material or construction of the building which were not discovered until after the building had been completed
  • once a building passes to the owner, he insures it under a fire and perils policy
  • the cost of rectifying latent defects is not covered by a fire and perils policy
  • underwriters will only accept risk if satisfied by design - technical control undertaken by specialists, who issue a certificate of (qualified) acceptance

[edit] The Insured

[edit] What the policy covers

Inherent defects

  • if there is no physical damage but an inherent defect in the structure is threatening its stability the policy will cover the cost
  • damage to premises caused by subsidence, heave or slip of land is not covered unless it arises from an inherent defect in the foundations
  • discovery of an inherent defect does not in itself constitute a claim since there must be damage or threat of collapse

Policy exceptions

  • damage arising from fire and the perils normally insurable under a fire policy
  • damage arising from alterations, modifications or additions during the period of insurance
  • damage caused by or contributed to by inadequate maintenance
  • damage exceeded from any process for which the building was not designed
  • faulty or inadequate weatherproofing unless requested at the outset

[edit] Period of Insurance

  • ten-year policy starts from the date of practical completion
  • but issued at the start of construction to enable compliance with Technical Control
  • policy contains no cancellation cause

Maintenance Period

  • contract works policy is extended to give cover during the maintenance (defects liability) period
  • risk of duplication of cover during that period
  • if during that period damage occurs that is covered by both policies, decennial policy will only pay in excess of the amount payable under contract works policy

[edit] Sum Insured

  • a full value sum is total estimated cost of re-building the premises, including provision for professional fees and removal of debris
  • a first loss sum is lower that the full value when the risk of a total loss may be low

[edit] Premium affected by:

  • type of building and intended usage
  • design and type of construction
  • foundations and site (soil) conditions
  • project location
  • amount of excess and indexation
  • basis of cover (full value or first loss)