Know the Drill - October 2020

Know The Drill - October 2020

In our October issue of Know the Drill we:

Introduce you to WorkAon and discuss the potential for ACC levy savings for large employers
Outline 5 considerations you need to be aware of before signing a Licence of Air Space or Air Right Agreements
Discuss recommended insurance options to cover the cost to your business should a project be delayed due to a valid damage event covered by a contract works policy

WorkAon ACC Accredited Employer Programme

WorkAon is a specialist injury management division of Aon, responsible for administering ACC related claims for large employers. WorkAon sees 22% of NZ employees’ approved by ACC to manage and self-fund their work injury liability claims, instead of ACC.

Over the last 12 months, employers have been paying 20% more for their ACC levies due to the loss of the WSMP discount.

Large employers who pay ACC levies of more than $150k pa should speak with Aon.

There are a number of benefits that come with the ACC Accredited Employer Programme, including:

A 60 - 90% discount on their ACC levy, depending on the options selected;
Full visibility over work injury claims, including determining work injury cover;
Active participation in the return to work activities of injured workers;
Direct contact with a dedicated case manager allocated to claims.

What to consider if signing a Licence of Air Space or Air Right Agreement

If a crane is needed on a project but encroaches into third party airspace (above third party property), contractors may be asked to enter into Licenses of Air Space or Air Right Agreements.

Please be aware that there could be some issues with these agreements which impact your insurance. We recommend that any proposed licence agreement is sent to Aon or your PL insurer (with regard to point 4 below) before they are entered into and prior to the agreement being signed.

The agreements can contain very broad indemnity clauses

Broad indemnity clauses can be wider than your PL insurance i.e. “will fully indemnify the Owner against any damage, loss, expense or cost caused to or occasioned by the Owner” – which can be dangerous as they are not tied to liability arising from the operation/use of the crane and its associated equipment only. If the clause is not tied to the “operational activity” then it could expose the contractor to a claim for indemnity for damage or loss arising from, for example, an adverse weather event which causes damage to a surrounding property;

The agreements don’t generally include reference to a “crane hireage company”

If the agreement only refers to the contractor, it could mean that you may fall foul of the liability assumed by agreement exclusion in your Public Liability (PL) insurance, as you are taking on liability for the actual crane operation. That should not be the case where the crane is hired on a “wet” hire basis;

“Make good provisions” clauses are for replacement value

Check to see if the agreement contains a “make good provisions” clause in relation to third party property for “replacement value” (old for new) – this will expose the contractor to liability wider than the PL insurance which provides cover “like for like”;

Notification of agreement vs confidentiality clause

The agreement may require the existence of the licence to be notified to your PL insurer. If the agreement contains a confidentially provision, that provision needs an exception to ensure that by notifying your PL insurer, you’re not in breach of the confidentiality clause.

Professional Indemnity requirements

Where professional indemnity (PI) insurance is required, the specific PI risk needs to be defined and your current PI insurance needs to cover that (defined) risk.

Advance loss of Profit

Have you considered the cost to your business through contractual penalties should your client’s project be significantly delayed due to loss or damage to the works?

Advance Loss of Profit (ALOP) and Delay in Start Up (DSU) insurance is key for Principals to consider in conjunction with placing the project Contract Works insurance policy.

ALOP and DSU can provide your clients with financial security if a project doesn’t complete on time due to a valid damage event covered by the contract works policy. ALOP and DSU can provide the Principal with the revenue that was forecast to receive had the original completion date occurred, or to the additional financing (debt holding costs incurred because of the delay). ALOP and DSU can assist contractors to mitigate the extent of your Liquidated Damages exposure.

Please discuss ALOP and DSU with the Aon Construction team whilst in the processes of placing the project Contract Works policy.

Know the Drill - October 2020