Insurance Archives

The Responsible No: New guidance – don’t risk it all on an amended contract

by Clair Mooney | 9 Jan, 2025 | Building Safety Act, Contractual and Legal, Insurance

Establishing clear contractual arrangements from the outset of any construction project is critical. This is a core conclusion from virtually every review of the construction sector. As far back as 1866, The General Builders Association put out the following statement:

“It is not right to bring under the builder’s consideration legal conditions, the effect and value of which he cannot rightly estimate without consulting it’s solicitor”.

JCT was established nearly 100 years ago to address concerns and help create a standard set of terms. These contracts address the complexity of multi-tier supply chains, mutually dependent relationships and different parties joining the contractual chain at different times. Other standard form contracts, such as NEC, are now commonplace. Yet recent research from Reading University into Procurement and Contracting Practices in the Finishes and Interiors Sector highlight that 64% of businesses in the supply chain regularly start a project without a contract in hand and the norm is to work on amendments that effectively bespoke relationships and seek to pass down unreasonable amounts of risk.

It is this culture that the Duty Holder Regime (now enshrined in the Building Regulations) seeks to address and puts under additional scrutiny attempts to shift risk through contract. This change to law potentially resets legal precedence for passing down risk. Significantly too, recent advice from the Construction Leadership Council (CLC) should not be dismissed as a token effort to restate the problem. The Grenfell Inquiry made clear the risks in the following finding:

“Studio E (Architect), Rydon (Main Contractor) and Harley (Cladding Specialist) all took a casual approach to contractual relations. They did not properly understand the nature and scope of the obligations they had undertaken, or, if they did, paid scant attention to them.

They failed to identify their own responsibilities for important aspects of the design and in each case assumed that someone else was responsible for matters affecting fire safety. Everyone involved in the choice of the materials to be used in the external wall thought that responsibility for their suitability and safety lay with someone else.”

In a rare open Statement, the CLC highlights another serious concern that all in the supply chain (particularly clients) need to be alert to:

“Many Professional Indemnity Insurance policies only cover claims for contractual liabilities to the extent that those liabilities would exist in the absence of the contract. … Clients have no control over whether contracting parties can secure PII cover that will respond when the client suffers a loss and wants to recover that loss.”

In plain terms CLC has made it clear:

“if a client seeks to claim for loss or damage, it cannot be relied upon that it will be settled by the PII insurers, and the consultant/contractor potentially faces financial ruin, and the client left with a claim that cannot be recovered.”

To help members bring these points together, improve understanding of where and how template contracts can and should be amended, highlight areas of particular concern and support negotiations with clients FIS has produced a new Using Standard Form Contracts. This has been made available to FIS Members through the Contractual and Legal Toolkit and has been designed to support the Responsible No Campaign.

Blog post written by Iain McIlwee to launch new FIS Factsheet: Using Standard Form Contracts.

Using Standard Form Contracts

Members - download your copy here

FIS Contractual and Legal Toolkit

Members - access the toolkit here

FIS Responsible No Campaign

More detail of the FIS Responsible No Campaign is available here

Lens Blog – Navigating the Turbulent Waters of the UK Construction Industry

by Oscar Venus | 30 Oct, 2024 | Insurance, Lens Blog

What an absolute rollercoaster the construction industry in the United Kingdom has experienced in the last 4 to 6 weeks, and I want to talk about some of the issues that I see that have emerged, and to consider what may happen in the future.

The background of course has been the demise of ISG Construction Ltd in administration in the latter part of September 2025 and the Administrators have published a Statement of Affairs which makes absolutely grim reading with the supply chain being owed significant sums of money and they are not likely to receive anything. In my next Blog I may be able to update readers on what has emerged but as at 26 October 2024 it is not clear how some of these major projects will be recommenced and completed and what the impact will be on the supply chain.

In the past few days, we have seen the fallout of two subcontractors also going into administration as a result of the amounts of money that they were owed. As to whether or not there were other issues affecting these organisations, remains to be seen.

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The 12 pays of Christmas

by Oscar Venus | 14 Dec, 2023 | Contractual and Legal, Insurance

With cashflow continuing to be a thorny issue across the industry, it’s never been more important to ensure your payment preparations are in good health. Here, our expert elf delivers a dozen festive financial pointers to help prepare your business balance sheet for the New Year and beyond…

Unfortunately we’re still seeing significant contractor and sub-contractor business failures across the UK, resulting in a trail of devastation for the supply chain.

I’ve recently dealt with payment and cashflow issues for a number of SMEs and the level of difficulties currently being experienced is extraordinary.

After 40 years in the industry I don’t think I’ve ever seen so much chaos and it’s desperately sad to see so many businesses going into administration and good people being made redundant.

It’s essential that FIS Members minimise risk in 2024, so with apologies to the classic tune <<The 12 Days of Christmas>>, I’ve wrapped up a dozen of my own top payment tips to ensure you don’t lose sleep over payments and can enjoy a silent night…

1. Use Mr (or Mrs) Clause – use an experienced professional to analyse any contracts you’re bidding for and highlight any high-risk clauses. This will allow you to discuss the issue in advance and request that the clauses are removed or mitigated. There’s no use doing this after your tender has been accepted!

2. Make a list and check it twice – ensure you have a payment schedule in your contract, setting out the dates when you’ll make an application for payment, what you need to provide, the due and final dates for payment and when a pay less notice will be issued. Stick religiously to these dates – your commercial manager should have them in their calendar.

3. Stay another day – beware your payment schedule running out. If a job runs past the last date in the schedule, make sure it’s extended until you reach practical completion.

4. Talk turkey – payment applications are often rejected or reduced because you haven’t provided the relevant information. Too much detail is better than not enough, so ensure your commercial manager follows up each application with a call to the contractor to establish they have everything they need. There’s nothing worse than getting to the end of the month, only to find your application has been shredded!

5. Follow the star – make sure you do what the contract says about submitting notices. So if it says they must be sent by email and registered post, do that. If it says they have to go to individuals and an organisation, do that instead.

6. Wrap it up – a sub-contractor told me recently that if his money isn’t received by the final date for payment, he issues a notice to suspend the performance of his obligations on site the next day. You’re perfectly entitled to do this and I find it’s a good wake-up call to both contractors and employers.

7. Do you hear what I hear? – you’ll often get an early indicator if there are trading difficulties, so keep your eyes and ears open. If the contractor or employer isn’t paying on time or reducing payments, share intelligence and compare notes with other sub-contractors.

8. Avoid a ding-dong – if you’re delayed, tell the contractor or employer why ASAP and give early notification of an extension of time. Some clients say they don’t want to ruffle feathers, but your priority is your <<OWN>> business. A standard contract allows extensions of time and payment of loss and expense, so take advantage.

9. Head for quality street – quality is still a major issue in the industry, with clients being charged for failing to rectify defective workmanship, remove rubbish and comply with health and safety regulations. The Construction Quality Improvement Collaborative is a major step forward – it’s worth signing up at www.cqic.org.uk to demonstrate your credentials and commitment to doing things right.

10. Jingle all the way – I recently issued a notice of adjudication to a defaulting party who quickly paid up. The Low Value Dispute Adjudication offers a fixed fee for an adjudicator to run such a dispute so you should take advantage – find out more at www.rics.org

11. Goodwill to all men – SELECT is among the many bodies to sign up to the Conflict Avoidance Process (CAP), which you can use as an early intervention to prevent issues escalating and allow you to keep working (and earning). Check it out at www.rics.org/capledge

12. Stuff those turkeys – finally, if you’re working with an organisation that’s repeatedly giving you the runaround, have the courage to tell them their goose is cooked and give them the boot.

In addition to these pointers, please read the CICV’s Best Practice Guide – available to download for free from www.cicvforum.co.uk – to improve your commercial management.

There’s no doubt we’re in for another tough 12 months across the industry but those firms that prepare properly will manage to weather the snowstorms to come.

FIS and Construction Shield launch new insurance offering for FIS members

by Clair Mooney | 6 Oct, 2022 | Insurance

To help manage risk and provide additional support to its members on insurance matters,FIS has partnered with specialist insurance consultants Construction Shield and AWL Homeproof Limited.

This new service will enable members to test the effectiveness of existing cover and secure an alternative quote. It will also open-up exclusive access to specialist insurance products at highly competitive prices. Members will be supported with Professional Indemnity, Contractors All Risk, Commercial Combined Business Insurance, Directors and Officers Insurance, Motor, Performance Bonds and a range of other relevant specialist insurance products.

FIS is focused on compliance and improved risk management in the finishes and interiors sector. In the past couple of years members have increasingly raised concerns related to rising insurance premiums, reduced cover, onerous endorsements and at times the inability to gain access to the correct cover.

The aim of this new service is to leverage the collective power of its membership to create greater awareness of the risks faced in our sectors and enable meaningful research and development to be carried out, driven from claims and risk data for our members.

This new partnership will support the development of a deeper understanding of claims, how risk is being assessed and to develop different and a more progressive relationship with the insurance sector, one that offers a truly bespoke service whilst also allowing for greater access to insurance products at improved pricing structures.

Commenting on the scheme, FIS CEO Iain McIlwee said:

“The insurance market has hardened significantly in recent years and created a real challenge for members in large parts of our market. This new relationship is structured to help us to better understand and attack this problem and work better as a community.

Our mission is all about building an effective compliance environment and reducing risk for members. Understanding the scope and causes of any claim is key to this, as is establishing a closer working link with the insurance sector to help manage out the causes of claims. We see this as very much a first step in terms of developing a healthier insurance umbrella for our community and focusing our technical and commercial services on reducing risk.”

Mark Potter from Construction Shield added:

“We are enjoying working with FIS who have shown themselves to be a progressive and innovative trade body and very dedicated to the needs of their community. We look forward to working more closely with this community and better understanding pricing and helping to manage risk and also present a healthy and attractive sector to the insurance world. This is something we see progressing over the next few years and we have some exciting ideas around creating a captive and possibly one day a mutual solution that could serve this sector”

The service was officially launhed at the FIS AGM and Regional Conference on 6 October in London.

To obtain a quote, members need to contact Construction Shield on 0121 726 5130 at least 6 weeks prior to their renewal date. They will ask you to provide the schedule from last year’s policy and any details that may have changed or evolved in your business. Construction Shield and AWL Homeproof will aim to secure the best possible price for you.

IUA publishes new fire safety clause for high rise repairs

by Clair Mooney | 8 Sep, 2022 | Building Safety Act, Insurance

Projects to tackle fire safety risks on high-rise residential buildings have been boosted by the publication of a new model insurance clause covering fire safety risks. The wording has been developed by the International Underwriting Association (IUA) and the Department for Levelling Up, Housing and Communities for use in work being completed under the government’s £4.5bn Building Safety Fund. It will help speed up the removal of unsafe cladding, encourage a greater safety culture within the construction industry and provide insurers with increased confidence in risk management processes employed by the construction sector.

The model clause is freely available for use by underwriters looking to provide professional indemnity insurance for building cladding remediation work. The Building Safety Fund was introduced in order to cover the cost of such refurbishment work on high rise residential blocks over 18m.

Levelling up Secretary, Greg Clarke said: “Our priority is making sure people’s homes are safe and that safety standards are high.

“Alongside our tough new regulatory regime, this new clause that has been developed with my department will help us do just that.

“We welcome the work of the IUA and the underwriters who are taking a proportionate approach to fire safety cover and I thank insurers in advance for using it.”

Chris Jones, IUA Director of Legal and Market Services, said:

“Our new model clause sets out a number of key risk management processes that will ensure work being carried out is conducted within recognised industry standards. This will help improve accountability for safety measures and foster an investment in quality construction.

“The market for construction professional indemnity insurance has been difficult in recent years, reflecting concerns about the potential for historic liabilities to develop into future claims following the Grenfell Tower tragedy. Each new risk must continue to be assessed on a risk-by-risk basis, of course, but the clause should provide underwriters with greater confidence to offer effective insurance solutions for future work.”

A survey of IUA members in September last year revealed a cautious willingness amongst IUA members to underwrite fire safety risks on new projects to remove defective cladding from high rises. Around two thirds of respondents stated they would provide a limited form of cover, whilst a further 4% were happy to offer unrestricted protection.

The poll was carried out by the IUA’s Construction Professional Lines Working Group which was established in 2019 to encourage greater engagement between insurers, government, regulators and construction firms.

Copies of the IUA Building Safety Fund Cladding and Fire Safety Limited Exclusion and Aggregation Clause are freely available to download at https://www.iua.co.uk/IUA_Member/Press/Press_Releases_2022/IUA_publishes_new_fire_safety_clause_for_high_rise_repairs.aspx

Any questions or comments related to this clause should be fed to Iain McIlwee, (iainmcilwee@thefis.org) who is representing the FIS Community on the Construction Leadership Council’s Insurance Working Group

Professional indemnity insurance restrictions continue to harm industry

by Clair Mooney | 16 Jun, 2022 | Insurance

No easing of professional indemnity insurance restrictions, finds second CLC survey.

Limited availability of professional indemnity insurance (PII) and costly premiums are continuing to harm construction businesses and limiting the ability of firms to work on building safety remediation, according to the second annual survey from the Construction Leadership Council’s PII Group. The cross-industry survey revealed no real easing in the PII cover available to the profession since the group carried out its first survey a year ago. The 2022 survey, which received 652 responses, found that although high-rise residential work represents just 5% or less of workload for two thirds of firms, many are still suffering from increased premiums and excess levels, coupled with wide-ranging exclusions on cover. The CLC PII Group is particularly concerned that the situation is having a disproportionate effect on the ability of SMEs to take on work where cover for fire safety is required, to pay their premiums and to meet their claim excess in the event of a claim.

The results revealed:
• Nearly in one in five (17%) respondents are paying more than 5% of their turnover for their annual premium. One in twenty (5%) are paying more than 10% of their turnover for their premium, which is unsustainable for smaller businesses.
• Nearly a quarter (22%) of respondents are still unable to buy the cover they want or need (a slight improvement on 29% in 2021).
• Nearly seven out of ten respondents (68%) had restrictions on cover for fire safety (the same as 2021)
• A quarter (24%) have lost jobs as a result of inadequate PI insurance (compared with 31% in 2021).
• Three out of ten respondents (30%) have changed the nature of their work due to inadequate PII (compared with 29% in 2021).
• More than four in ten (42%) said that the experience of buying PII was significantly worse than their last renewal.
• A third (33%) of respondents have been declined insurance by three insurers or more, an improvement on 2021 (44%).
• Slightly more respondents have secured a claim excess that is 2% or less of their turnover (67% compared to 64% last year).
• Just over one in ten (12%) has an excess that is 21% of their turnover or more compared to 4% of respondents last year.
• There has been a slight improvement in the amount of cover available for “any one claim” rather than “in the aggregate” (64% compared to 60% last year).

Samantha Peat, managing director, Wren Managers and chair of the CLC PII Group, said:

“The market conditions for PII cover remain extremely tough for construction firms, particularly SMEs, and in the light of energy price rises and materials inflation, these are worrying times. The CLC PII Group will continue to work with Government and insurers to try and ease the situation.”

To download the full findings click here.

Members experiencing challenges secturing insurance or with questiosn about level of cover should contact FIS on 0121 707 0077 or email info@thefis.org and we can refer you to our specialist advisors.