48 — Build 133 — December 2012/January 2013

Business of buildingFEATURESECTION

Protecting your business

IF THE BUSINESS VEHICLE is written off in a crash or an unhappy client launches court action, the costs can be high. Insurance is not only a good idea, it is a requirement in some building contracts. Here are the policies every owner of a building business should consider.

Public liability insuranceAll builders and self-employed

contractors should have this for protection against damage to third-

party property and personal injury caused by negligence.

If a builder is excavating for a retaining wall and the bank collapses, for example, damaging a nearby car, public liability insurance will cover the cost. It will not pay for repairing the bank and getting

the retaining wall back on track – these are covered by

contract works insurance.While work injuries

are generally covered by ACC, if someone was injured

because of gross negligence, public liability insurance covers costs and legal damages.

Contract works insuranceStandard construction contracts for new buildings require a contract works policy to be in place.

The policy should be sufficient to carry out a complete rebuild of the project if neces-sary. It may also provide cover for:

● materials in transit to or from the site and while stored off site

● expenses necessary to get the project back on track

● increases to costs during reconstruction ● temporary site buildings needed during reconstruction.

Contract works insurance doesn’t cover: ● construction plant, equipment and tools ● consequential losses caused by delays, penalties, liquidated damages or losses discovered when an inventory is undertaken

● existing property – unless specifically included in the policy

● faulty design, workmanship or materials.Check whose policy subcontractors are covered by – the main contractor’s policy or their own.

Labour-only contracts often do not require the builder to have contract works insurance – make sure the client understands that they need to take out this cover.

Insurance for a builder is as essential as a good kit of tools. But do you know what the nine different types of cover protect you from? And

when can you ask clients to take out their own cover for a building job?BY PAULINE SUTTON, FREELANCE WRITER, WELLINGTON

Build 133 — December 2012/January 2013 — 49

Business of building FEATURESECTION

For additions, alterations or renovations, builder and client should discuss insurance responsibilities. Usually the client obtains a contract work extension to their existing policy.

Professional indemnity insuranceSometimes called errors and omissions insurance, these policies protect a builder held responsible for a service that did not have the promised results, or if they failed to provide a service and someone incurred financial loss. The cover includes judgments, settlements and defence costs if legal action is involved.

Statutory liability insuranceIf you unintentionally breach a law, these policies pay for defence costs or representa-tion costs at complaints tribunals. The most relevant laws in this area for builders are:

● Health and Safety in Employment Act ● Resource Management Act ● Building Act ● Consumer Guarantees Act ● Fair Trading Act.

Criminal allegations or liability arising from deliberate, wilful or reckless acts or omissions are not insured. Fines or repa-rations may not be covered, depending on the specific law. With cases taken by the Ministry of Business, Innovation and Employment Labour Group in relation to the Health and Safety in Employment Act, for example, reparations are often covered but fines are not.

Employers’ liability insuranceSome workplace injuries or accidents are not covered by ACC, and in these cases employees can bring civil actions against their employers. Employers liability insur-ance includes things like:

● occupational stress ● heart attack or stroke as the result of mental effort or strain caused by the job

● disease caused by gradual process, partic-ularly if the employer has not provided a safe workplace

● disease or infections from air-conditioning ● disease or infections from exposure to passive smoking

● nervous shock caused by defective premises.

Not covered are: ● injuries where ACC provides cover ● injuries arising out of wilful, intentional or deliberate conduct of the employer

● claims involving exposure to asbestos.

Licensed building practitioner insuranceThe LBP scheme has brought new risks for builders, for example, claims arising from the supervision of non-licensed prac-titioners or defence costs for investigations following complaints.

LBPs with public liability and statutory liability insurances should ask their insurers if there is an extension available to their current policies.

Business assets insuranceThis insurance covers things like buildings, tools, plant, machinery, stock and materials. Trade tools are not covered by personal insurance even if a business operates from the builder’s home.

As with all policies, check the fine print. For example, check to see whether tools are covered:

● when left in a locked van ● over multiple sites ● for replacement value (the cost to replace them with new) or just market value (the cost to replace with tools of the same age and condition)

● if they are stolen, lost or damaged.

Business interruption insuranceThis pays out for financial losses if a busi-ness can’t operate after damage to business

assets, such as after a fire. It puts the business owner back in the same financial position they would have been in had the interruption not occurred. The cover may pay out just for a limited period of time.

Some policies do not cover loss after nat -ur al disasters like earthquakes and floods.

Commercial vehicle insuranceA vehicle is crucial to get tools, equipment and materials to jobs, so insurance is vital.

Check what a policy says about: ● no-claims bonuses ● windscreen and glass cover ● replacement or market value ● cover for employees’ vehicles if used in conjunction with the business

● the age of drivers ● accident-related loss or damage to prop-erty carried on/in a vehicle

● costs of salvaging loads after an accident ● third party cover for damage to adjacent property

● replacement sign-writing ● specialist fit-out or accessories such as roof racks, spoilers, sound systems

● legal liability cover for accidents involving a vehicle or any other vehicle being driven with the vehicle owner’s permission

● hiring another vehicle while the business van is off the road

● trailers being towed.Consider the cost of the extra cover against the risk in your circumstances.

Limit your insurersTo avoid potential disputes between companies after a claim, it is generally a good idea to limit the number of insurers you deal with, but get quotes from several before buying cover. Registered Master Builders Federation and Certified Builders Association of New Zealand also offer poli-cies for their members.