As we’ve outlined previously, construction insurance policies are very different from one insurer to another, providing very different levels of cover. There are typically over twenty key coverage differences, and these can include limitations, conditions, or even complete exclusions that can cost you thousands of dollars, or even your business altogether. These important differences often do not appear on a policy schedule, and can only be identified through reading a 30+ page policy wording. Having the right policy in place ensures that you don’t encounter any surprises when something goes wrong.
One coverage difference that can lead to uninsured losses is in relation to welding or ‘hot works’. Several insurers have exclusions noting that they do not cover any losses connected with hot work unless the work is conducted in strict compliance with the requirements of Australian Standards. They then specifically reference the requirement to adhere to Safety in welding and allied processes, Part 1: Fire precautions (AS1674.1 – 1997) and Part 2: Electrical (AS1674.2 – 2007).
The application of this exclusion raises several questions:
- What are the Australian Standards, and how do I ensure that I comply with them?
- Do my subcontractors understand and comply with the standards?
- Can my SWMS be modified to reduce the chance of a loss?
- Do my subcontractors who conduct welding/hot works have similar exclusions on their policy?
With the standards not commonly known by builders, the most straightforward way of protecting your business is to simply ensure that your Contract Works and Liability insurance policy does not contain any conditions or restrictions on welding or hot works.
Over recent years, MBA Insurance Services (MBAIS) has seen a handful of claims where hot works have resulted in large fires due to insulation igniting. Typically these builds have been approaching completion and worth a significant amount, with the builder contractually responsible for the loss. While we don’t see a high frequency of hot works losses, a few have been greater than $1 million in value, and having the right policy in place can ensure you have cover should something unfortunate happen on site.
MBAIS provides a free service to review MBA members’ insurance programs and advise if the coverage is appropriate for your business. As a specialist construction insurance broker, we have a thorough understanding of the complexities of insurance in the building industry. We utilise specialist construction insurance markets to provide you with market leading cover – at very competitive premiums. To arrange for a free review of your policy, contact MBAIS on (03) 9411-4555.