Jardine Lloyd Thompson Ltd

1. Jardine Lloyd Thompson Ltd Construction and Professional Indemnity Insurance Understanding The Issues Andrew Harrison-Sleap Phone: 0207 528 4711 E-mail: andrew_harrison-sleap@jltgroup.com 17 April 2008

2. Agenda • What Does PI Cover? • Drivers For Purchasing PI • PI Coverage Strategies • Links with Other Policies • Claims Examples • Factors Affecting PI Premiums • PI Contractual Considerations

3. What Does PI Cover? • Indemnity for claims made during the period of insurance as a consequence of professional acts, errors or omissions • First party costs incurred prior to handover to mitigate matters that would have otherwise given rise to a claim • Includes coverage for liabilities due to a sub-contractors professional activities • Defence costs

4. Project PI Time Line Only Professional Activities conducted after the Retroactive Date and before the Discovery Period are covered Run off / Discovery Period Design & Construct Feasibility / Front End Design Defects Liability Policy Start Date 1/05 Retroactive Date 1/04 Practical Completion 1/08 Final Completion 1/09 Policy End Date 1/15 Note: Policy will only cover claims made during the policy period (including Discovery Period). Maximum Policy Period 10 years

5. Who are Professionals? • University qualification • Industry bodies (Association of engineers) • Examples: Architects, Engineers, Quantity Surveyors, Surveyors, Project Managers • Not included: Workmanship, Manual Labour

6. Covered Contractor Activities • Feasibility studies • Front end designs • Detailed designs • Technical information calculation • Geotechnical studies • Project management • Surveying (Quantity and Land) • Procurement management

7. Covered Liabilities • Rectification costs (including first party prior to handover) • Consequential losses (Profits / Revenue/LDs) • Third party bodily injury and property damage (Only consultants not contractors)

8. Drivers For Purchasing PI • Client requirements • Financiers requirements • Balance sheet protection • Part of good corporate governance (risk management)

9. Types of Cover • Annual policy covering all claims made for all projects of the Insured • Single project policy (Multi year – 10 years max) • Single project annual

10. Third Party Liability Insurance • Liabilities for: • Third party property damage • Third party bodily injury • Obstruction, loss of amenities, trespass, nuisance, interference, denial of access or any like cause • Occurrence based policy • Period: Works and Defects Liability • Completed operations coverage

11. Links With PI – Third Party Liability • Third party liability covers liability for third party property damage and bodily injury only • Excludes professional services coverage for consultants (fee only work) • Only covers professional risks of contracting activities • Does not cover defective works

12. CAR Insurance • Insures physical loss or damage to works • First party policy (not a liability policy) • Period – Works and Maintenance • Visits coverage • Limited/Extended maintenance (On site only) • Full guarantee maintenance

13. CAR Insurance – Defects Coverage • DE5 – Covers all damages except betterment of defective part • DE4 – Excludes defective component part • DE3 – Excludes defective property • DE2 – Excludes defective property and that which relies upon it for support • DE1 – Total exclusion for defective design, plan, specification, materials or workmanship

14. Links With PI – CAR • CAR covers defects but only where there is physical damage to the works • CAR only provides coverage during the construction and defects liability period (must have guaranteed maintenance cover) • CAR does not cover consequential losses (LDs)

15. PI Claims • Design and Build Shopping Centre Car park • Subbed D&B to third party contractor • ECV: GBP 6m • Defective design of expansion joints • Cracking of car park • Demolition and Rebuild • Consequential Loss (Loss of trade) • Subcontractor Capped Liability

16. CAR Claim Example 1 • A building has a structural defect in one wall which causes an entire building to collapse • Covered by CAR during construction and maintenance period • Not covered if damage after maintenance period. Covered by PI if the Insured is liable • Consequential losses not covered. Covered by PI if the Insured is liable

17. CAR Claim Example 2 • A building has a structural defect in a wall which causes damage in that wall only. The rest of the building has structural defects but theses other parts of the structure are not damaged • Damaged wall covered by CAR during construction and maintenance period • Not covered if damage after maintenance period. Covered by PI if the Insured is liable. • Rectification of other structural defects (not damaged) not covered. Covered by PI if the Insured is liable • Consequential losses not covered. Covered by PI if the Insured is liable

18. Factors Affecting PI Premium • Relationship with underwriter • Claims record • Type of work • Type of project (Construction, EPC / D&B, FEED) • Contract value / Fees • Territory • Experience • Risk Management • Programme Structure

19. Requirement to maintain coverage (12 years) Available at commercially acceptable terms Provide certificates of insurance / to whom it may concern letters – Not policy Limits of liability (GBP10m aggregate) Not any one claim coverage. Agg limit Principal not insured Annual coverage preferable Contractual PI Insurance Requirements

20. Thank you! Questions?