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If there’s one weak area of knowledge common to both renovators and insurance brokers, it’s JCT contracts. Lack of confidence and understanding always carries a risk. And in the case of a broker arranging insurance for their client’s project, this can translate into their most valuable asset not being properly protected. JCT contracts are a key component of our formal CPD programme because we believe that the more insurance brokers know, the better.
WHAT IS A JCT CONTRACT AND WHY DO THEY MATTER?
The Joint Contracts Tribunal, or JCT contracts as they are commonly known, are a set of standard documents used by the building industry to help clearly set out the responsibilities of all project parties (with the property owner identified as the “employer”), and their obligations to one another.
WHAT ESSENTIALS DO BROKERS NEED TO KNOW ABOUT JCT CONTRACTS?
When we are advising brokers around the arrangement of contract works insurance for their clients, we frequently have to provide advice on the selection and effect of the JCT suite of contracts. Here we share our view on the top 5 essentials every broker advising on JCT contracts should know.
- If peace of mind is a consideration, the most appropriate way to insure any contract is for the employer (the homeowner) to remain in control of both the Building and the Works insurance, regardless of whether the JCT contract concerned is the Minor, Intermediate or the Standard form.
- Contract administrators should choose the following clauses for their clients to ensure full control and peace of mind:
- 5.4b for Minor Works
- 6.7C for Intermediate and Standard form where there is an existing structure
- 6.7B for Intermediate and Standard where the project is new build
- Joint names insurance clauses in JCT contracts – where Employer and Contractor are first party to the insurance - are not universally welcomed by standard building insurers. This is because, by agreeing to jointly name the contractor on the building insurance, the insurer gives up their right to subrogate (recover their costs from the contractor’s liability insurers) where the claim is for damage caused by contractor negligence.
- Relying on the Contractor’s liability insurance is risky. The property owner will have to prove negligence, and rely on the contractor to be cooperative. These situations can also very easily damage the relationship between contractor and employer.
- Whilst the JCT set-up can result in a higher insurance premium, it does guarantee full control and the widest cover available, and it ensures that the property owner doesn’t need to rely on anyone else’s insurance.
We take a more in-depth look at the importance of Insurance and JCT Contracts in a guest post on The Joint Contracts Tribunal website.
MITIGATING RISK THROUGH KNOWLEDGE
We know that JCT Contracts is a topic in which brokers still lack confidence. That’s why we take a really detailed look at the subject in our CPD programme. Motivated by the desire to prevent risk to a property through the lack of insurance, or the wrong cover, we share our expertise with brokers, project managers and contract administrators so they can best advise their clients.
If your private client team would benefit from deeper knowledge and increased confidence in JCT Contracts, ask for more information about our CPD training series.