It is customary (except in North America) for Construction All Risks (CAR) policies to provide some cover for loss or damage which occurs to the permanent works after hand over to the owner.
The three most common types of cover during the maintenance, or defects rectification, period are:
- Guarantee maintenance, being the broadest form of cover
- Limited (or extended) maintenance
- Visits maintenance, which is the narrowest form of cover.
Typically in the UK, regardless of the coverage type, insurers will want to limit coverage to the maintenance period in the contract, but normally no more than 24 months.
What cover is really provided?
Guarantee maintenance cover excludes loss or damage to the permanent works (the completed construction) from the handover date unless the damage was:
- Caused by the contractors while they were performing snagging or defects work as required by the maintenance provisions of the contract, or
- Caused by an event which happened before the maintenance period began (i.e. before practical completion or the contractual equivalent).
Guarantee maintenance cover will provide protection for loss or damage to the permanent works arising during the maintenance period if; for example, it is caused by supplier bringing items onsite for incorporation into the permanent works. This is particularly relevant when the construction includes machinery and/or plant. If combined with the broadest design, materials and workmanship cover (LEG 3 or DE5), guarantee maintenance provides comprehensive cover during the maintenance period- including loss or damage which is the result of a defect in design or manufacture.
Under limited (or extended) maintenance,
cover is excluded unless the damage is:
- Caused by the contractors while they are performing tasks to fix any defects as required by the
maintenance provisions of the contract, or
- The result of an incident occurring on site during construction or erection.
This clause would not cover any loss or damage, arising during the maintenance period, to items which are to be incorporated into the permanent works which was caused prior to the arrival of these items on site, such as during the manufacturing process. Nor would it cover loss or damage as a consequence of a defect in design which is undertaken off site and/or prior to construction beginning.
A visits maintenance clause provides the most restrictive coverage. It excludes loss or damage to the permanent works from the time maintenance period starts unless the damage is caused by the contractors while they are performing tasks to fix any defects as required by the maintenance provisions of the contract.
What does this mean to you?
The construction insurance market is dynamic and the level of coverage available from the plethora of insurers is constantly changing. As a bare minimum, your policies should be:
- Broker written manuscript wordings and not an underwriter’s template form (even if this is substantially amended by endorsement)
- Reviewed prior to each annual renewal to ensure they reflect the current market position.