Construction bosses who phoenix firms to face fines or bans

Sarah Aldridge, Credit Broking Director for TL Dallas comments on Construction Enquirer’s recent article – ‘Construction bosses who phoenix firms to face fines or bans’

 

‘The attached article suggests that changes to insolvency rules will be coming through shortly to prevent both phoenix companies rising from the ashes and avoiding paying creditors, as well as providing more protection for rehabilitating the debtor. 

These changes will take UK insolvency laws closer towards the USA rules. These changes are, in my opinion, long overdue.  There could be interesting times ahead… watch this space.’

Read the full article here.

 

TL Dallas is a leading provider of insurance solutions to protect against insolvency or protracted default exposures. If you would like to discuss your specific business needs we would welcome the opportunity to see if we can help provide more certainty in these uncertain times. Please email our Credit Insurance team on credit@tldallas.com.

TL Dallas acquire Buckingham House brokerage

The recent acquisition by TL Dallas of the specialist book of demolition insurance business of Buckingham House (London) Ltd, will trade from our City office as TL Dallas (City) Ltd t/a Buckingham House.

The founder of Buckingham House, John Norbury has  over 30 years experience as a qualified insurance broker and has specialised in insurance for the demolition contractors and allied industries since 1991. Buckingham House has also been an active Industry Service Provider member of the National Federation of Demolition Contractors since they were established.

We are pleased to extend our service offering through this acquisition and particularly pleased that Mark Clements who has worked with John Norbury for 25 years, has joined the team in City office with John continuing to act as a consultant.

TL Dallas’ Managing Director, Polly Staveley comments, ’We are delighted that John has agreed to sell his book of business to TL Dallas – it fits very well with the existing construction sector expertise that we have within the team in our City office and is further enhanced by the fact that Mark Clements, who has worked with the clients for over 20 years, has joined our team. We are looking forward to working with the clients and developing the business further.’

If you would like more information regarding demolition insurance please contact:

Mark Clements – mark.clements@tldallas.com or call 07881 934054/0207 426 5347
Mike Mitchell – mike.mitchell@tldallas.com or call 07496 888411/0207 426 5343

Alternatively, email enquiries@demolition-insurance.com

 

Carillion’s collapse forecast to cost trade credit insurers £31 million

Jonathan Smith, Strategic Director – Trade Credit & Surety for TL Dallas & Co Ltd comments on today’s news that Carillion’s collapse is forecast to cost trade credit insurers approximately £31 million in payouts.

‘As I live in Wolverhampton, the impact of this has already been felt hard by the employees of the company, as well as by others directly or indirectly, as this article makes clear.

Some positive action has been taken by the banks to provide additional funding lines or other support to some subcontractors. Other companies have taken on employees of Carillion which give some employment certainty and this may be something we see more of.

The real impact of this situation will take time to work its way through, but the one clear thing is we are only just at the beginning of the process. The domino effect is something we have seen time and time again with other corporate failures such as Carillion. So we expect to see the ripple effect of this continuing for some time to come.’

TL Dallas is a leading provider of solutions to protect against insolvency or default exposures and if you would like to talk about specific needs we would welcome the opportunity to see if we can help to provide more certainty in these very uncertain times.

Read the full article here.

Contact Jonathan Smith for further information on 07983 325766 or email jonathan.smith@tldallas.com.

Duty to Warn

Duty to Warn describes the obligation of an experienced construction professional to warn others of defects in works – even if the professional isn’t directly responsible for that aspect of the works.

There are a number of well known cases demonstrating the courts attitude to Duty to Warn and demonstrating the cost to construction professionals who either ignored, or were oblivious to the risk.

How can a Duty to Warn be created?

There is no general duty to warn in English and Scottish law however, there are circumstances in which a duty can exist.

In it’s judgement on the case of Plant Construction Plc vs Clive Adams Assoc., the Appeal Court offered the following conclusions:

  • There will usually be an implied (sometimes explicit) contractual term that a contractor shall perform a contract using the skill and care of a reasonably competent contractor
  • The circumstances of a particular contract will establish the scope of that obligation
  • Where an experienced contractor is involved and the design of the works is not only defective, but obviously dangerous there is an “overwhelming case” that the contractor is bound, as part of its obligation, to use appropriate skill and care to warn a client of dangers it perceives 


The court left open the question of circumstances where the defective was not obviously dangerous.

Other considerations could include:

  • Contracts will often place a higher obligation on the contractor than reasonable skill and care, even so, there is an exposure through both the Tort of Negligence and the implied term in the Supply of Goods and Services Act 1982.
  • The more experienced, skilled or specialist the contractor/construction professional is, the higher the obligation may be considered to be.
  • Contractual requirements to inspect, monitor, supervise, etc. create a contractual requirement of, not only a Duty to Warn, but to oversee the rectification/remedy of the defect.
  • New Engineering Contracts (NEC) require both parties to give early warning of anything which may delay the works or increase costs. If the contractor fails to comply with this obligation they will be unable to claim for additional costs/delays following any subsequent compensation event.
  • The Construction (Design and Management) Regulations 2015 require that the principal designer ensures the works are carried out in a way that minimises Health & Safety risks.
  • The Health & Safety at Work Act 1974 creates obligations to warn both employees and third parties about the dangers present in a place of work.

What should you do?

  • Understand your exposure to Duty to Warn, through the mechanisms listed.
  • Educate your staff to reinforce their understanding of their responsibilities, and create a simple process for them to raise concerns promptly with senior management and in turn other contractors and employers.
  • As a minimum, warn of all dangerous or potentially dangerous defects.
  • Make sure that your company’s warnings to clients or other contractors are clear, unambiguous 
and in writing. If your warning isn’t strong enough the courts may still consider you failed in 
your duty!
  • Check that your insurance broker understands Duty to Warn and your potential exposure to 
it.
  • Always seek to buy Professional Indemnity Insurance with a specific Duty to Warn extension.

For further details and advice please contact our construction specialist, Mike Mitchell – mike.mitchell@tldallas.com or call 07496 888411.

 

Alistair Dean, Partner, Anderson Strathern, comments,

‘The concept of a duty to warn is an important one, but in some respects an undeveloped area of the law. The cases, which mainly come from the English courts, demonstrate that it is not easy to succeed in actions which allege that construction professionals breached their duty to warn. There are two legal consequences of failing to discharge a duty to warn. One is in the possibility of a professional indemnity claim. The other is the possibility of a health and safety prosecution under the Health and Safety at Work Act 1974. The ‘rules of the game’ are the same in either case, and I would suggest that the underlying rationale is the application of common sense, and an abundance of caution. If a construction professional, during the course of an inspection/site-visit, is concerned that the works are being carried out in such a way that there is a health and safety risk, that should be immediately flagged up to all of the relevant parties. However, as is demonstrated by the case of Goldswain -v- Beltec Ltd in 2015, a structural engineer (and by extension any designer) is entitled to assume that their drawings will be followed by the appointed contractor, and there is no obligation to supervise the works to ensure such compliance.’

alistair.dean@andersonstrathern.co.uk

 

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Credit Insurance = Strong Foundations

Economically, everything starts and ends with the construction industry and the market itself is a useful barometer of what is happening out there (Guardian Economic Growth).

The association of business recovery professionals, ‘R3’, recently reported that late payments from a customer and the knock on effect from a bad debit is responsible for at least one fifth of UK corporate insolvencies in the last twelve months. The latest research reveals that this trend hasn’t improved since 2014.

Over half (57%) of insolvency practitioners identified construction as the sector with the worst track record for late payment.

Late payment problems and relatively high insolvency rates are not a coincidence. If the sector could diminish the extent of the issue it would see an improvement in its business survival rate.

2016 saw a number of high profile construction insolvencies including, Cardy Construction Ltd, LSC Facades Ltd, HOC (UK) Ltd, UK Construction Ltd and The Dunne Group. The knock on impact of these has been significant to suppliers and contractors, short term cash flow being the immediate concern.

Our market provides specialist construction wordings and bespoke policies that recognise the idiosyncrasies of contracting on JCT or NEC contracts, along with those supplying goods and services into the construction sector. Most insurers will provide coverage relating to applications (as opposed to traditional invoicing) and final account balances but others will provide additional cover for retentions, variations, day works and even pay when paid style clauses covering against upstream third party insolvency.

Choosing an insurance partner is not straightforward in any sector. Where contracting is involved, this is further complicated by the different types of cover on offer, as mentioned above, but also the speed with which insurers typically pay claims.

Leading construction insurer TMHCC recently reported that where some subcontractors were having problems obtaining valuations from The Dunne Group Ltd in administration, TMHCC were able to use their own quantity surveyors to value works removing the payment delay risk and avoiding the possible domino effect and support their clients cash flow.

The good news is that JCT, in recognition of the Construction Supply Chain Payment Charter, is intending to introduce specified payment dates after interim valuations that should lead to greater certainty throughout the supply chain. In short, monthlyI VD’s will be on the same day each month with payment due 7 days from valuation with a final payment date of 14 days. It remains to be seen whether this can be achieved, but certainly a step in the right direction.

Construction companies are often asked to provide some form of bond to the main contractor or the client either as part of a tender or, in agreement with being awarded the contract. Some companies will arrange a ‘bank bond’ for these, however, providing a ‘Surety bond’ instead can be a massive advantage to the firm as it is usually unsecured and off balance sheet, meaning it doesn’t eat into the banking facilities so allows more working capital for the company.

At TL Dallas, our Credit Insurance department supports the client with any trade insurance negotiations, protecting against the impact of a bad debt and arranges Surety bonds for the client to provide to the main employer to secure the contracts.

For further details and advice, please contact the Credit Insurance team in Bradford on 01274 465500 or Falkirk on 01324 717466.

 

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Working airside? What is the worst that could happen?

 

Do you ever carry out work at an airport, either land side or airside? High value buildings and aircraft, large, concentrated volumes of people – what is the worst that could happen?

Whether you are re-laying part of the runway or simply installing a cooker hood in a departure lounge restaurant, most standard Public Liability (PL) insurance policies will automatically exclude airside work, and many will even exclude any work at an airport.

 

The usual solution

The solution offered by many insurance brokers is to arrange a stand-alone Public Liability policy to the limit of indemnity required by the airport (£50M for BAA airports). This is usually provided through schemes run by the like of Marsh, Willis etc. and policies are relatively cheap.

 

The important questions

These policies will cover you while you are undertaking your work (Public Liability), but what cover does it give you after you have left the airport (Products Liability)?

If your completed works are defective and cause injury or damage, which insurance (if any) do you think will respond?

The solutions are simple and cost effective.

 

To find out more, or discuss any other Construction insurance issues, please contact Mike Mitchell, mike.mitchell@tldallas.com or call 07496 888411.

Novating Contracts – The Insurance Time-bomb?

Do you ever have the employers professional team novated to you? Do you understand what all of the risks are?

Increasingly Professional Indemnity insurers are including a clause on their policies requiring that their insured (you) do not waive or in any way limit full rights of recovery or subrogation against another party.

It is common practice for an employer on a building project to engage their own professional advisers before appointing a main contractor. When the main contractor is appointed, the employers own advisers are often then novated across to the main contractor. A straight novation means that the contractor assumes the employers role in their contract with the adviser – complete with all the pre-existing terms and conditions of that contract.

Many professional advisers are engaged on their standard terms & conditions, which usually contain contractual caps on the advisers liability. For example, a very large international consultancy uses standard terms & conditions which cap all liability for the projects it consults on at £1M.

By accepting a novation from an employer, on the advisers standard terms, you risk invalidating your own Professional Indemnity policy.

Bear in mind that the contracts you work on now are the same ones that may generate claims in 3, 5 or even 12 years time and the policy which will respond is the one which is live when the claim is made against you. With a disconnect between your insurance arrangements and your contractual arrangements there is a real risk of creating a Professional Indemnity time-bomb with the potential to damage your business for years to come.

Irrespective of insurance you, as Main Contractor could be signing up to contracts and warranties, with requirements to maintain £10M Professional Indemnity, while the negligent party on the employers original professionals team have been able to cap their liability at a significantly lower level, leaving you exposed.

There are simple and cost effective (in many cases they are free) solutions to the problem. For further details or to discuss any other Construction Insurance issues please contact Mike Mitchell by email, mike.mitchell@tldallas.com or call 07496 888411.