Constructing new conditions for cover

The new Major Project Form, issued by the Joint Contracts Tribunal, has caused a stir in the construction industry and has implications for property, construction and professional indemnity brokers.

Issued in June 2003, the MPF aims to simplify the existing conditions.

It attempts to provide conditions that accord with construction market norms, avoiding the expensive and time-consuming amendment of conditions for substantial construction projects.

In the MPF, clients retain possession of the site but give right of access to contractors. The insurance provisions are short, there are no collateral warranties for design liability and clients cannot retain money from sums due to contractors pending completion of the work. There are also clearer lines of responsibility between clients and contractors.

Brokers asked to obtain cover under the new contract need a different approach. The MPF does not contain standard alternative clauses for insurance of the works, existing structures, public liability and so on. It simply provides for the cover requirements to be identified in an appendix to the contract.

The rationale is that major projects often require bespoke arrangements anyway, so contracts do not need to be cluttered with unnecessary standard conditions.

Of concern for professional indemnity brokers is the new design liabilities created by use of the Contracts (Rights of Third Parties) Act 1999. This is intended to remove the need for collateral warranties, though it creates problems for checking cover availability.

Despite reservations, the MPF has received a generally favourable response and has already started to be used. Brokers coming across the MPF should take time to consider the substantially changed insurance arrangements.