The fifth in FIDIC’s Covid-19 webinar series took place on Tuesday 21 April 2020 with an event focusing on insurance issues, writes FIDIC communications advisor Andy Walker. The webinar was attended by around 700 attendees and looked at how insurance and liability issues within the FIDIC forms of contract may operate during the Covid19 pandemic and what security insurance provides for the project participants.
Chaired by FIDIC CEO Nelson Ogunshakin, webinar speakers included FIDIC board member Anthony Barry from Australia, Peter Tunnicliffe, president, CDM Smith Construction, Michael Earp, senior vice president and executive director commercial risk solutions at AON, FIDIC contracts committee special advisor, Dr Nael Bunni and Michael Salau, partner at Beale and Co. FIDIC president Bill Howard and Daduna Kokhreidze, FIDIC’s head of legal and compliance were also present.
The speakers covered a range of issues including Covid-19 project risks and potential liability of the parties, insurances under FIDIC contracts and potential coverage for Covid-19 consequences and the insurances available to various industry participants and the potential coverage for consequences arising from the current crisis situation affecting the construction sector.
FIDIC board member Anthony Barry started by putting the Covid-19 crisis in the context of an event that has taken place in an already hard insurance market. He said that this has meant that capital has left the insurance market and obtaining cover was much harder than previously. “So, we have a market where the insurance business is under stress and then we had Covid-19 landing in amidst that,” he said. Barry made the point that insurance should not be seen as a “first resort” backstop and consultants should not look to insurers to see Covid-19 as a causal link for claims. Covid-19 is a pandemic that could and should have been planned for and PI insurance should not be seen as a saviour to resolve the current problems on contracts as a result of the current crisis, Barry said.
Peter Tunnicliffe, president of CDM Smith Construction, highlighted the challenges that had faced his firm as a result of the Covid-19 crisis and underlined the need for companies to work with their insurance brokers to understand the interpretation of policies. Because of the many grey areas, working together was essential to avoid legal battles which were in nobody’s interest. He also said it was important to keep accurate records of all impacts on the business during the current crisis as it is much harder to gather this information later.
Michael Earp, senior vice president and executive director for commercial risk solutions at AON, reminded attendees that there had to be a precise and measurable link between losses that had been suffered and the terms of an insurance policy. Turning to business interruption, Earp said that any “peril” in that policy would need to be clearly defined and it was vital for consultants to look carefully at the terms of any “all risks” policy(ies) to see if viruses and pandemics were excluded from cover. Good record keeping was essential, especially with regard to interruptions to the supply chain, and consultants needed to be in constant touch with their clients when any issues arose, said Earp.
FIDIC contracts committee special advisor Dr Nael Bunni discussed who bears the risks associated with Covid-19 under the FIDIC contracts 1999 and 2017 and the various stipulations across the suite of contracts. He highlighted the different clauses to bear in mind and how these could become relevant in the light of the current crisis. These clauses, for example, may enable the consultant to argue that a suspension of their services was allowed on health and safety grounds, Bunni said. It was also necessary, he stressed, to study precise terms of the FIDIC contract being used and how that related to insurance requirements, particularly in respect of the Contractors All Risks insurance policy and business interruption insurance and the exclusions under them.
Beale and Co partner Michael Salau gave a legal perspective on the current situation. Covid-19 exclusions are likely to appear in renewals going forward and there might be some delays in securing renewal of policies in the future as a result, he said. Echoing the views of other speakers, he urged people to look closely at the wording of policies and also urged firms to keep accurate and up-to-date records, which was clearly a developing theme of discussions around contracts and the Covid-19 crisis.
A number of issues were raised during the webinar discussion, including whether Covid-19 policy cover would be available in the future. Michael Salau thought that this was unlikely and even if it was made available then it would be extremely expensive. Anthony Barry said that the issue of any future cover for pandemics was not as important as the overall provision of professional indemnity cover for some of the more extreme collateral warranties and onerous terms being demanded by clients. Concerns over the future availability of cover were also raised, given that, among the professions, architects and engineers accounted for a very large proportion of the value of claims made under PI policies.
Summing up the webinar, FIDIC CEO Nelson Ogunshakin said that given the focus at this and previous webinars on dialogue, communication and working together, it was more important than ever for the whole industry to unite to find solutions to the current crisis. In that regard, alternative dispute resolution (ADR) would come to the fore as a potential solution to the contractual challenges posed by Covid-19, he said.
It’s convenient that the next FIDIC webinar, entitled Covid-19: ADR and the role of dispute avoidance, is taking place on Thursday 23 April at 12 noon CET. As with all our webinars so far, we expect a high number of registrations for this event so please sign up as soon as possible.
Click here to book your place on the event on ADR and dispute avoidance.
Please click below to view a recording of the FIDIC insurance webinar
