Construction Law/Insurance


Hi Peter,

I have a question regarding FIDIC 2005 MDB harmonised condition in relation to Insurances and design risk.

In accordance with Sub-Clause 18.2 (d)  Insurances shall also cover loss or damage from the risks listed in sub paragraphs ( c), (g) and (h) of sub-clause 17.3 (Employers risks).

I am particularly interested in the consequences of the above Sub-Clause in respect of Sub-Clause 17.3 (g) "design of any part of the Works by the Employers Personnel or by others for whom the Employer is responsible"

Therefore it is my understanding that in accordance with the Contract the Contractor's Works insurance has to cover loss or damage resulting from the Employer's design.

If this is the case then theoretically the Employer or the Contractor can claim against the Contractor's insurance for any financial loss resulting from any issue/fault/omission in the Employer's design including time related delay costs. Of course such claims would be limited by suitable wording of the insurance policy.

I would appreciate your comments on this issue and in particular some help in understanding what the real intention of the Contract is in respect of the Contractor effectively insuring both parties against the consequences of defects in the Employer's design.

Kind regards


Dear Peter,

I am not sure that I understand your question.  Clause 18.2 (e) modifies the requirements of clause 18.2 (d).  The insurance is 'excluding (in each case) risks which are not insurable at commercially reasonable terms'.  I would expect the Employer to require the designer to have sufficient PII to cover any design faults and consequential losses, if such an insurance was commercially available.  

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Peter M. Elliott


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 before submitting a question.


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