SA Affordable Housing November - December 2019 // ISSUE: 79 | Page 23

FEATURE
One of the biggest concerns contractors have with
underwriting is the quantum of the deductible (or excess),
as well as misunderstandings as to whether something is
a single or multiple claim, says Maritz. The deductible is
sometimes so high as to make the cover meaningless in
the case, for instance, of storm damage. “The size of the
deductible must be transparently stated in the policy – and
contractors must understand and take note. This becomes an
issue where the employer takes out the insurance and the
deductible applies to the contractor when he makes a claim
for whatever reason. In that instance, the contractor would
be wise to qualify the contract that he will rather take out his
own insurance and can negotiate it with his underwriter. He
should also qualify his tender for the project,” says Maritz.
CONTRACTOR CONCERNS
Angela Hughes, commercial underwriting manager at Standard
Insurance Limited.
“Another point which contractors often misunderstand is
that each and every claim carries a separate deductible.”
He gives the example where on three separate occasions
the wind blew off the side-cladding on a project and the
contractor thought he could make a single claim. In fact, the
excess had to be applied three times.
Where a sub-contractor is working on a project where
the contractor has taken out the insurance, it will similarly
be the case that the excess will be for the account of the
sub-contractor where its work is at fault; but if it is general
weather causation then the contractor would pay the
excess. “Parties don’t always understand the relationship
between the parties – the employer, the contractor and the
sub-contractor – although it will be clearly spelled out in
the contract.”
Maritz lists another area of confusion as being latent
defects. “There may be a defect which was not evident at
the time of project completion but reveals itself, as a roof
leak for instance, only when the first rains come. By this
time the home may be occupied, and the occupant suffers
damage to his or her personal possessions such as furniture
and electrical equipment. Who’s responsible to pay for
what? If it had rained earlier, the defect would have been
picked up and the contractor held responsible. The loss must
be very clearly distinguished between the works and the
personal belongings, with the latter being the responsibility
of the tenant or owner, under his own insurance policy. The
contractor will not be responsible for the computers and
other household belongings.”
Maritz emphasises that this is another reason why
a contractor should be professionally advised by an
experienced broker, as he may otherwise not be insured,
may be under-insured or have a claim declined for incorrect
information at the time of underwriting.
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"The problem is that sub-
contractors are so desperate
for work that they often don’t
read what may be a whole
page full of onerous terms and
conditions."
Professor Tinus Maritz, Acting CEO of the Joint Building
Contracts Committee.
The case of damage done to a sub-contractor’s work, say
a plumber, by subsequent workers such as tilers, is not
typically an insurance claim but is covered under the
contract and is claimable from the other sub-contractor as
damages. “However, the onus of proof is always difficult,”
he says.
“These issues are always contained in the contracts: the
problem is that sub-contractors are so desperate for work
that they often don’t read what may be a whole page full of
onerous terms and conditions. Sub-contractors are currently
in a difficult position. Contractors tender as low as possible
to get work, and then force sub-contractors into onerous
conditions to try claw back some of the profit. Enforcing
terms such as ‘cleaning up after’ can save the contractor
itself considerable amounts of money, by forcing the
responsibility on to the sub-contractor,” says Maritz.
THE UNDERWRITER’S PERSPECTIVE
Peter Suremann, underwriting manager in the Construction
Guarantee business of Lombard Insurance Company, says,
“The general principle of insurance is that the contributions
of the many (through payment of premiums to an insurance
scheme) should cover the losses of the few. Actuaries
employed by the insurers ensure that premiums are set
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