The Construction Leadership Council has launched an an attack on “onerous” amendments made by clients to standard contracts, voicing worries about the impact on contractors’ insurance coverage.
In a statement, the CLC’s Professional Indemnity Insurance (PII) working group warned clients against amending the terms of standard contracts unless necessary, to avoid exposing contractors to PII coverage exemptions.
Standard form contracts are too often amended to include liabilities and obligations that are “too onerous for the nature of the work” and do not fall within the scope of the contractors’ PII cover, the group wrote.
As a result, a client’s loss and damage claim may not be covered in the contractors’ PII cover, leading to contractors facing “financial ruin” – a situation it said was “not in the best interest of any party”.
The statement said: “The CLC believes that onerous amendments make contracts unviable, reduce competition, increase risk and lead to unnecessary legal costs required to review legal liabilities created by the amendments.”
Such an approach would help the industry meet the recommendations of the Grenfell Tower Inquiry Phase Two report by clarifying roles and responsibilities around fire safety design, the working group wrote.
It may also insulate contractors from having to pay more than their “fair share” if hit with a PII claim involving a contractor in administration or without adequate PII cover, the y added.
The working group called upon clients to routinely start with an unamended template, with “explicit responsibility” for clients and their solicitors to explain amendments for a particular project, with any variations clearly highlighted.
Working group chair Samantha Peat said a “sensible approach” would simplify risk allocation and provide clarity for project teams and PII providers.
“It will also support the focus on accountability, competence and the need for better information management called for by Dame Judith Hackitt and enshrined within the Building Safety Act and the wider reform of the Building Regulations,” she added.
