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