In this article, Director of Chedid & Associates, Mr. Habib Jaalouk, focuses on the risks of partial or total collapse associated with human error and insurance that can be taken to cover against these risks. Such risks arise from the direct effect of gravity evidenced by the forces of load and overload, and pressure from water and wind, earth and ensiled materials. Human errors in such accidents take the form of errors in calculation or sizing, omissions or errors plans, insufficient documentation and eventually, execution errors.

The Code of Hammurabi, created by the sixth Babylonian king over 3,500 years ago, tells of how important homes were to his subjects and proclaimed a law laying down the most severe penalties for incompetent builders: “If a constructed house collapsed and kills the master of the house, the Architect shall be punished by death; if the master’s child dies, the architect’s child shall put to death.

“If the contents have been destroyed, he must restore what has been destroyed and because he did not make the building strong and it collapsed he must rebuild the house at his own expense.”

Many years later in France, when the Civil Code was established (1804), Liability to builders was defined: Article 1792: “If the building constructed for a fixed price is destroyed completely or partially through a structural defect, even resulting from a flaw in the ground, its architects and builders shall be liable for ten years.”

Article 2270: “After ten years, the Architect and the builders shall be released from guarantee undertaken with construction works of which they were in charge.”

The Extent of Risk
Through the centuries, builders have usually used time honored construction methods without much innovation. But with the recent world population explosion, demand for housing infrastructure and industrial plants has grown and the land area naturally suited for building has shrunk. On top of this, architects are continuously facing new challenges such as construction of high rise towers on reclaimed land with the most innovative architecture. Consequently, builders have had to come up with imaginative solutions to new technical problems and design new materials to meet these new demands. It follows that the higher technical level of new construction projects makes them more vulnerable deterioration over time.

The high demand for buildings means they have to be erected more quickly while at the same time providing the improved quality required by consumers. Builders had to develop new materials – concrete, steel and wood.

When we talk of a new building, we can regularly say it is a prototype, or at least a one-off construction, with all consequences that this implies. Each building requires an individual study, taking into consideration its location and the load it will have to bear throughout its lifetime. Innovative construction methods and new materials will need to meet architectural requirements or economic needs. A new building is often the product of a large number of different trades, each employing workers who are often low skilled and sometimes working in bad climatic conditions. Consequently, the probability of achieving zero-fault performance in the building industry is virtually nil, even if the contractor has employed all the resources he thought necessary to do the job well.

After looking at buildings from a technical point of view, we will consider how their future owners regard them. Any building is first and foremost an important financial commitment that will be amortized over a long term. Once the work is finished, any major fault in the building can become an unbearable financial burden and may in extreme cases, lead to bankruptcy. It is in the owner’s interest to protect themselves against major construction faults even if they are not responsible for causing defects, as they will always have to bear consequences. All these reasons, at least in some countries, have caused the legislators to lay down some very precise rules for builders. In these countries, the problem of defects in building is dealt with in very different ways, but there are basic elements of the system, and the mechanism for technical control of building. Few countries require builders to insure against their liability and the problem encountered by the principals in the event of damage to their buildings remains unresolved in most countries.

In the event of damage, the first step that the principal can take is to call the contractor responsible for the defect and request rectification of its errors or bad workmanship.

But this is not always possible, and the contractor may no longer exist or he is still in business but may not have resources or the willingness to remedy the defect.

Legal Liability Insurance and the Burden of Proof
To overcome this problem, it may be worthwhile to insist that builders take out liability insurance to cover their liability. However, legal liability policies generally exclude the defective structure itself and cover only consequential loss, and require the principal to provide proof of negligence. This solution may logically be sound, but it leaves the principal of the defective building with few problems. He must, first of all, establish who the liable party for the loss is among all participants to the construction act. This is not always easy and can take some time.

Furthermore, there may be several levels of liability which are often taken into by Court which in any case take a long time to be established. During this time, the damage will not have been repaired. Even then, it is not certain that the contractor or the designer found liable will still be in business, that he is solvent or that he is still insured. Finally, cover limits may prove inadequate to carry out all the repair work needed.

Inherent Defects Insurance – Decennial Insurance
The owner/ principal may choose to take out a policy covering him against loss due to major structural defects, over a sufficiently long period (10 years), which could lead to a total or partial collapse or threat of collapse. This is inherent defects insurance. Inherent defects insurance provides protection against the cost of repairing, restoring and strengthening of the insured building if damages are caused by structural inherent defects. It provides cover for a 10-year term for the date of practical completion. It is on material damage first party basis (this means that insurance pays if damage occurs, there is no need to prove negligence against a third party).

The inherent defects must originate within the main structure of the building, the load bearing parts or the structural parts of the building. The main insured under this insurance is the principal but the policy is assignable should interests change during the policy term.