When you, as Main Contractor, engage in a RIAI (Royal Institute of Architects Ireland) Standard Form of Contract for contract works involved with the alteration or extension of an existing structure, Clause 26 is the inserted clause which relates to the ‘Responsibility for Existing Structures’ and effectively places the onus on the ‘Employer’ to insure both the existing building and its contents for damage for the specified perils listed, relieving you, as Contractor, with the burden of this responsibility. However where the Contents of the existing structures are not the responsibility of the Employers, you as Contractor are responsible to indemnify the Employer against any liability they may incur to Third Parties for any loss or damage to the Contents due to your negligence, omission or default, subject to the minimum limit of Public Liability you have in place.
Another advantage of the Clause 26 for Contractors is that it requires the Employer to include a waiver of all rights of subrogation against a contractor and/or sub-contractors under the existing structures insurance policy and furthermore, this clause stipulates that the Employer have no right to recover from the Contractor any consequential loss however incurred by any of the specified perils referred to in the clause.
Many Employers are not aware that they may have no rights of recovery from a contractor in the event of damage caused to their existing structure during such works and this clause is often overlooked. Whilst this Clause gives particular protection to a Contractor, it is extremely difficult for the Employer to adhere to the full requirements in this clause. Many insurers regard contract works as a material fact which must be disclosed to them before work commences. It is standard market practice in the insurance industry that any existing structure/property that is undergoing works of alteration or extension, whether vacant or not, cover under the insurance policy will provide the perils of Fire, Lightening, Explosion & Aircraft only and not the specified extra perils as noted in Clause 26. The insurance policy will also automatically exclude any damage caused by contractors/builder.
This essentially means that the Employer has a huge risk exposure and does not have any method to recover losses caused by the contractor via the Contractors insurances or the existing structure insurance policy.
It is therefore important that you discuss with the Employer about the removal of Clause 26 from the contract. Your Contractors All Risks policy will provide cover for you in the event of any damage caused to permanent or temporary works during the course of the contract and your Public Liability will provide cover for Third Parties in the event of any bodily injury or property damage occurred during the course of the contract.
Top 3 Points for a Contractor before completing renovation works on existing structures where Clause 26 applies to their Insurance policy:
note the permitted exclusions
Remember: It is important that you discuss and go through Clause 26 with the Employer before the contract works start.
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