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?

5. Who are Professionals?

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. Contractual PI Insurance Requirements 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 (GBP 10m aggregate) Not any one claim coverage. Agg limit Principal not insured Annual coverage preferable

20. Thank you! Questions?