This is the second article in our series taking a deeper look at the proposed revisions to NZS 3910:2013. Previous articles in the series are at the bottom of this page.

The insurance provisions have not been subject to any major revisions. However, some changes have been made. These are summarised below.

The general provisions at clause 8.1 are largely unchanged. However, clause 8.1.2 now expressly confirms that costs associated with a failure by one party to notify the other insured parties of any material policy change are to be the responsibility of the party that has arranged the insurance.

Contractor arranged insurances

Clause 8.2.3 now expressly confirms that where parties are severally (separately) insured, the actions of one insured shall not affect the rights of any other insured.

Clause 8.2.7 now requires that the Contractor only provide policy wordings to the Principal where the Principal is a named insured. Otherwise, all that is required to be provided is a certificate of currency.

Contractor arranged Construction Insurance

Clause 8.3.2 previously required that the insurance policy ‘notes the interest’ of any other Person listed in the Special Conditions whose interest is required to be ‘noted’ under the policy. However, absent some specific circumstances, ‘noting an interest’ does not in and of itself make that person an insured party under the contract of insurance; protection provided under a policy of insurance for ‘noted’ parties is a legal fiction. This has now been recognised and remedied with clause. 8.3.2 requiring that the policy ‘insures the interest’ of those Persons whose interests the Specific Conditions require insuring.

Public liability insurance

Clauses 8.5.1 and 8.9.1 (Contractor and Principal arranged respectively) each now require that public liability insurance also includes products liability insurance. On a strict reading, this is a significant change to the insurance coverage required to be obtained under NZS3910.

In reality, this change simply acknowledges that when ‘public liability’ insurance is purchased in New Zealand, what is typically being purchased is a ‘Public and Product’ combined policy (otherwise known as ‘General Liability’). Moreover, the crucial coverage in such policies is usually the Product portion.

The amendment expressly requiring that the ‘public’ insurance policy now include ‘product’ coverage is a useful amendment/clarification. However, in our view, it would be better to go one step further and rename the provision as public and product liability insurance.

Principal arranged construction insurance

There is an entirely new clause at 8.8.5 which provides that Principal arranged contract insurance may require that claims proceeds shall only be payable to the Contractor if the reinstatement or repairs to the Contract Works have been certified as completed in accordance with the Contract. That provision may provide that:

1. it shall not apply to insurance funds that the Contractor is entitled to receive irrespective of the progress in the reinstatement; and
2. insurance funds shall be progressively paid on a monthly basis in respect of repair works that are completed. (para-phrased)

For Principals and insurers, clause 8.8.5 can provide comfort that insurer-funded repairs to Contract Works will meet the required standard and not result in future claims in respect of insurer-funded defective repair work. However, we are wary of a potential inconsistency between the requirement that insurance funds be paid in respect of certified work that ‘has been completed’ and the monthly progress payment provision in respect of ‘repairs to the Contract Works that are completed.’

A further insurance-related amendment is found within the new clause. 7.2 - Contractor’s liability limit. In particular, clause. 7.2.3 provides that notwithstanding any liability limit, if the insured sum is greater than the liability limit then the Contractor’s liability shall be the level of cover under the applicable insurance policy. Accordingly, insurers are unlikely to obtain the benefit of the Contractor’s liability limit.

Further reading

Proposed revisions to NZS 3910:2013 released for market consultation

The Engineer to Contract role is no more under proposed changes to NZS 3910:2013