Many of our clients’ questions regarding their coverage relating to COVID-19 are very specific to their policy wordings. Below are some of the answers to questions that may interest the broader construction sector.
Q: How can third party (public) liability (TPL) insurance policies help covering COVID-19 losses?
A: TPL provides cover for sums which the contractor/employer are legally liable to pay arising out of third party injury which may (depending on policy drafting) include disease. It is unclear as to whether a contractor or employer would have a legal liability if a third party (which could include sub-contractors) contracted COVID-19. An example of where liability might attach is if the insured knowingly allowed (or didn’t take reasonable precautions to prevent) the spread of the virus. However, the liability of the insured will ultimately be established based upon the individual circumstances of the claim by the court.
Q: How does employers’ liability (EL) policies respond to the COVID-19 breakout?
A: EL provides cover for sums which the employer is legally liable to pay, arising out of injury which may include disease to employees (including labour only sub-contractors). It is unclear as to whether a contractor or employer would have a legal liability if an employee contracted COVID-19 during the course of their employment. Claims under this class are possibly more likely than under a TPL policy. It is possible, however, that principal contractors (and possibly employers) could receive subrogated claims from sub-contractor’s EL insurers (which may fall for consideration under a TPL policy).
Q: How can the cost of a delay in start-up/loss of anticipated revenue be recovered?
A: It is possible that where the employer has put in place project insurance, they may have included delay in start-up/loss of anticipated revenue insurance under the project policy. This insurance may include an infectious disease extension to provide cover for the employer’s (rather than the contractors) loss of rent/revenue/debt finance if practical/sectional completion is delayed due to COVID-19.
Q: What do I need to do if I decide to close a construction site?
A: Lockton suggests particular focus on ensuring there are robust systems in place to manage:
- The physical security measures and physical security protection that is in place on site;
- The prevention of water escape whilst site activities are suspended. If the water system can be isolated (and drained down) at the mains that would be ideal but this may not be possible and there may be fire suppression systems that are reliant on the availability of water;
- Continuing compliance with the Joint Code of Practice for the Prevention of Fire on Construction Sites;
- Buildings to be made water/weather tight (depending on the stage of the build);
- High value/portable plant and equipment to be removed and securely stored.