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Construction Law/FIDIC Red Book 1999_Clause 18. Insurance

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Question
Dear Peter

The Employer has a case where the Contractor (a unincorporated JV of 2 companies) is asking if they can provide separate insurence policies. Namely each JV memeber wants to give a separate CAR and also Third Party Liability policy.

We are of the opinion that specific Contractors “All Risks” (CAR) insurance is taken out in the name of the JV Partners so that only one policy of insurance provides cover for the JV’s works.

However we want to check what speaks against the Contractors proposal.

Many thanks for your answer.

Answer
Dear James,

I think that the answer to this question has more to do with insurance law and practicalities than FIDIC Conditions of Contract.  I presume that the partners want separate insurance to reduce costs.  

Generally, when a JV is accepted, then one party is nominated as the lead party for all contractual matters, even if both parties are jointly and separately liable.  I would look for insurance policies in the name of the JV or the lead partner.  My main reason is simplicity of operation.  If there is a claim, the insurers could deny liability, stating the risk was already covered by the other insurer.  Then you have to wait for that problem to be resolved before the claim is resolved.  One partner might deny responsibility for an injured workman on the basis that he was covered by the other partner's policy, or was due to the other partner's negligence, or was employed by the other partner resulting in delay and confusion.

For me, it is a matter for the JV agreement not for the FIDIC contract.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

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Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
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The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

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Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

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B Sc(Hons) in Civil Engineering

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