Ronald SmithVice President

Global Risk ManagementKerzner International

Construction and Risk Management:An Outsider’s Perspective

1. Atlantis The Palm, Dubai

2. Mazagan Beach & Golf Resort, Morocco

3. One&Only Palmilla, Mexico

4. One&Only Ocean Club, Bahamas

5. One&Only Reethi Rah, Maldives

6. One&Only Le Saint Geran, Mauritius

7. One&Only Cape Town, South Africa

8. One&Only Royal Mirage, Dubai

9. One&Only The Palm, Dubai

10. One&Only Hayman Island, Great Barrier Reef

11. One&Only Wolgan Valley, Australia

12. One&Only Sanya, China (2017)

13. One&Only Portonovi, Montenegro (2018)

14. One&Only Bahrain (2017)

15. One&Only Mandarina, Mexico (2018)

16. One&Only Santa Maria de Xala, Mexico (2020)

17. Atlantis Sanya, China (2017)

18. The Royal Atlantis Hotel & Residences, Dubai (2019)

19. Atlantis Hawaii (2021)

Global Footprint

19

Atlantis, The Palm

The Royal Atlantis Resort & Residences—Opening 2018

The Royal Atlantis Resort & Residences—Opening 2019

Pre- Construction:Consultant Contracts and Insurance

Primary Consultants

• Project Manager

• Cost Manager

• Architect of Record

• Engineering Services

• Surveyor

• Design Architect

• Code Compliance

• Environmental Impact

• LEED Services

• Landscape Designer

Primary Consultants – Insurance Coverage

• Professional Liability

• Public Liability

• Workers Compensation/Employer’s Liability

• Automobile Liability

• Umbrella/Excess

• Valuable Papers/Electronic Records

RISK

LIMITS

High Risk/Higher Limits

Low Risk/Lower Limits

Consultant Insurance – Setting Limits

• Local Consultants• Low Limits – usually 1x fee

• International Consultants/Local Subsidiary• Low Limits• Specific Cap on Limits of Liability• Limit Liability thru Local Company

• International Consultants• Low Limits (probably carry higher limits)• Specific Cap on Limits of Liability

Consultant Insurance – Scope of Coverage

Protection for Employer AND the Consultant

Article 880 of the Civil Code imposes mandatory obligations where the design of a building is prepared by an architect with the intention that the contractor would carry out the works under the architect’s supervision. Both the architect and the contractor will be jointly and severally liable to the employer for the structural integrity of the building for a period of ten years from the date of handing over the works.

Decennial liability provisions impose strict liability and are mandatory. It is not possible to contract out of decennial liability provisions, and they will apply regardless of whether fault can be proven.

While decennial liability provisions apply in the case of total or partial destruction, liability may also arise where there is any defect which “threatens the stability or safety” of the building.

The period begins from the date of the Take Over Certificate. The employer has three years from the discover of the defects or destruction to file their claims with the responsible parties

Decennial Liability Exposure

This is not a legal opinion – general risk management guidance

Negligent• Design• Manufacture• Installation

Professional Liability Exposure

Professional Liability: Insurance coverage for any and all damages arising out of acts of professional negligence, errors, omissions, breach of duty, misstatement, misrepresentations and other acts of malpractice for professional services performed by the Consultant under the Agreement. The policy shall include coverage for losses as a result of infringements of patents, copyrights, trademarks, trade name, trade dress, trade secret, marks, logos, symbols, slogans or other intellectual property. If the policy is written on a “claims-made” basis, the policy will have a continuity/retroactive date starting when the Consultant first provides any service to Owner/Manager and an extended reporting period equal to five (5) years from the termination of the Agreement, or the applicable statute of limitation, whichever is greater. If the policy is written on an “occurrence” basis, then the policy will be in-force at the commencement of the Agreement and continue until the Consultant’s obligations under the Agreement have terminated. The Consultant’s policy shall have limits in an amount not less than ten-million United States dollars (US$10,000,000) or four (4) times the gross consulting fee under the Agreement, whichever is greater, per occurrence.

Acts of Professional Negligence

Intellectual Property Losses

Claims Made v Occurrence

Policy Limits/per occurrence

Professional Liability Insurance

Coverage Period

Pre-Construction:Contractors and Insurance

Construction Insurance

• Construction All Risk

• Third Party (Public) Liability

• Professional Liability

• Workers Compensation/Employer’s Liability

• Automobile Liability (including mobile equipment)

• Umbrella/Excess

• Marine Open Cargo

• Plant & Equipment Insurance

• Valuable Papers/Electronic Records

• Original Strategy• CAR – Owner Controlled

• TPL, WC/EL, Auto --- each contractor

• OCIP Program• Employer structured comprehensive

program under one policy – all lines

• Modified OCIP Program• Employer places CAR with TPL Coverage

• Main Contractors/Subs have their own coverage

Evolution of Construction Insurance

Stakeholders In CAR Insurance

• Employer

• Lenders

• Main Contractor/Subs

Cost No uplift for contractor administrationDirect negotiation with international reinsurers

Control Leverage Employer’s strategic insurer relationshipsFacilitate efficient transfer to operational policy

Coverage Control of quality and scope of coverageDedicated limits. Do not have to share with other projectsPolicy period matches the period of project (i.e. 36 mos.)

Claims Direct involvement in the management of claims

Security Ensure the re-insurance program is with secureand fiscally sound insurers.

Strategic Advantage Develop corporate relationships with insurersto benefit Employer’s business as a whole

Key Issue Strategic Benefit

Drivers for Owner Controlled CAR/TPL

Lender Requirements - Security of Insurers

Security of Insurers (AM Best, S&P, Moody’s, Finch)

Insurance does not limit or waive Consultant/Contractor’s liability

Required minimum insurance does not represent adequacy

Named as Additional Insureds (except WC and PI)

Waiver of subrogation rights

Severability of Interest Clause (policy applies individually)

Cross Liability Clauses (avoid “insured vs insured” exclusions)

Duration of Coverage (particularly with decennial liability)

Coverage Territory (where work is done; claims brought globally)

Occurrence Limits only – Avoid Annual Aggregates

Other General Insurance Requirements to Consider

Q & A