Insurances

Insurance requirements vary from place to place, or client to client. There are certain insurances that are required for a construction company to operate in most jurisdictions with a robust contracting industry, others are client requirements. The more reputable the client, the higher the insurance requirements.

In most cases, however, the details of the insurance policy are rarely discussed between the contractor and the client. In most of the projects I have worked on, it is common to require all-risks insurance for the value of the contract price. It is often a condition of the construction contract. Otherwise, we often assume that we have covered the insurance issue and move on to more pertinent discussions at the tender stage. However, as this is something that needs to be organised, it's better to spend the time getting it right from the start.

98 Mitchell Rd was a job that required excavating two basements on sand, between an old building and one relatively new, and a distribution station at the back. The design solution for the car park was without any spare room, meaning that the execution of the Shoring Wall had to be precise. I could name a few more challenges that the project had to overcome, but my point here is that any project, no matter how simple, needs a proper risk assessment so that the correct insurance policy can be organised.

On a different job to the one described in this chapter; our site manager opened the site one day only to find out later that $750,000 worth of goods (in this case solar panels) had been stolen. We had fenced the perimeter of the site and installed CCTV cameras to no avail. The contract value was around $15 million.

The insurance company looked at our claim suspiciously. Requests for more information ensue. Some members of the construction team had to be interviewed individually. At the end of the process, the insurance company paid 80% of the claim. According to them, we had far too many solar panels on site. We should have timed our deliveries in accordance with the installation schedule to avoid stocking panels on site waiting to be mounted. For us, timing the deliveries in such a fashion would lead to extra administration and costs as containers and trucks are loaded to the limit to save fuel and time.

Nevertheless, the insurance company insisted that it was our responsibility to manage the deliveries in a safer manner and reduced the claim by 20% on the basis of the 'own risk' we had taken. There was nothing in the policy that described how to measure our own risk. Still, 80% was a breath of fresh air for the project. If they had decided not to pay, it would have put the company in a dire financial situation.

In the case described above, I was working for the contractor and therefore had access to the policy. No one on site had any idea what our liabilities were at the time of the robbery. I think for everyone involved in the project it was the first time we read an insurance policy, which was a laborious document to read.

Going back to our beachfront project, we knew that the works had to be insured. At the same time, Subsidence was still an issue, which meant that future damage to the distribution station was still a liability and the cost of repair was unknown. The CEO just wanted to be sure that the insurance was on our side and would cover any further damage if the removal of the Shoring Wall would go very, very wrong. But were damages to property outside the site included in the insurance policy?

No one knew.

We had to check the policy, but the contractor wasn't interested in showing it to us. However, notifying the insurance company was a contractual obligation, and according to the legal advice we got the contract was still on foot. Regardless, the contractor kept refusing to lodge any claim. Again frustration set in. Dan was reluctant to touch a job that could put further strain on the substation. Finally, after endless emails and phone calls, we managed to get hold of the insurance policy. To understand the situation better, we asked an insurance broker to look at the documentation.

We discovered that there was a provision for damage to neighbouring properties, but it was capped at a very low figure. Still, it was better than nothing, so we decided to ask the contractor to lodge the claim. Again, nothing happened. Finally, just as we were about to legally force the contractor to notify the insurance company so that Pat and his Team could start the job, something unexpected happened - the client rang to congratulate me. The contractor had agreed to return to the site. I was speechless.

Despite the good news, it would still take several months for the contractor to make any real progress on site. During contract negotiations I noticed that the contractor was keen on a hands-on approach to the project. So we agreed to let them solve their issues with Ausgrid, the wastewater connection and the remaining planning issues. The contract was changed to a design and build contract, and the majority of the consultants were novated to the contractor.

To my surprise, Pat and his Team decided to withdraw from the job. Pat cited previous contractual problems with the contractor as the main reason for the decision. I called the contractor to remind them that we needed a proper subcontractor to do the groundworks, but they told me not to worry, that they had learnt their lesson and had appointed the perfect subcontractor. I recognised the company they mentioned, but it was time to let it go. I had given the job a new start. It was no longer in my hands to take it any further.

Although indirectly, it was the insurance or the looming legal threat rising on the horizon, that brought the project together. Asking the contractor to notify the insurance company might have looked as a trivial question to me, but it also meant that insurance lawyers would soon start asking difficult questions. It could be the start of a long legal battle. For the contractor, it was better to take the opportunity to rectify the work than to do nothing and risk a large claim, which essentially was exactly what the client wanted.

I admit that it took a lot of walking around in circles and getting stuck in dead ends, to come to this conclusion. It may seem obvious now, but it wasn't at the start of the job. The fact that the client was adamant about not taking any consultants or contractors to court, not even the previous management team, may have led me in the wrong direction. Nevertheless, in the end, it was the threat of legal action that put everyone on the same page. That, in my opinion, was the moment when 98 Mitchell Road was finally put on the right track.

Most projects are unique. There's always something that happens that can’t be predicted. 98 Mitchell Rd had many of those moments. For several years I thought that if I had the opportunity to do the same job again, I would fire the design team and the contractor at the outset and bring in new blood. To avoid the same level of frustration I experienced trying to move things forward. But the main lesson from this project is not so much what to do in a similar situation, which is unlikely to be similar, but to understand that when things go wrong it probably means that the lines of cooperation on the project have been broken or were never there in the first place.

Getting buildings off the ground is a team effort. Willingness to cooperate is a much needed mindset to bring a project over the line. Cooperation allows people to band together to build the most complex structures. Members of a design team do it for a fee. The contractor does it for a profit. Money, in its different shapes and forms, bonds the team and fosters cooperation, but money alone is not what makes successful projects, as this collection of articles aims to clarify.

The possibility of having insurance lawyers poking 98 Mitchell Rd aligned the design team and the contractor on the initial purpose. It brought them together. It restored the lines of cooperation on the project up to the necessary level to move it forward. But it would require a great deal of care and attention, basic human skills, to ensure that these fragile lines wouldn’t break again.

When my work was done, I moved on to other projects and one of my colleagues took over the superintendent role. The client liked us very much and would visit us often to talk about progress on site and other projects. Eventually we had to introduce him to our favourite patissier. It was with great pleasure that he would drop by our office, sometimes with one of those gourmet cakes that always lifted our spirits.

I think on many fronts we liked to raise the bar in that office. We were obviously high on sugar levels. Years later, I felt compelled to leave because I was looking forward to being involved in more complex projects, but I always look back on my time at this firm with a smile.