Cessation of Works Clause – What you need to know about insurance for dormant sites
As specialist insurance brokers to the construction industry Construction Risks UK appreciate that construction projects can become dormant or “mothballed” for a number of reasons including cash flow shortages, payment disputes, weather conditions, a change of focus of resources onto other projects or even due to insolvency of the main contractor or employer.
However it is less well known that dormant sites are particularly unattractive to insurers who provide cover for plant, machinery and works (temporary and permanent) and public liability and it is crucial to understand why, and the implications on the insurance arrangements when this does happen to ensure continuity of cover.
From an insurance perspective, when a site becomes dormant the risk exposure increases significantly as plant, equipment and temporary and permanent works become much more vulnerable to damage and liability claims.
Criminals will often target dormant sites to steal valuable metals, machinery and building materials. Arsonists can find abundant fuel in the form of unguarded materials, structures and equipment to set on fire, and children are attracted to building sites which increases the potential for serious injury or death.
For the reasons mentioned above insurers will want to know when an active site becomes dormant and in most cases will want to reduce their exposure when this happens.
Indeed the majority of construction policies will have a specific clause written in called “Cessation of Works Clause”. This clause places an obligation on the policyholder to notify their insurer if work ceases for a set period of time, usually 30 to 60 days. Insurers then have the right to modify their policy terms. For example they may want to impose greater security measures, increase their premium or policy excesses or in some cases may even withdraw cover completely.
If the Cessation of Works clause is not adhered to and insurers are not notified when a site becomes dormant, cover can be invalidated.
If you have a construction policy, Construction Risks UK recommends that you examine all policy conditions closely, and discuss them thoroughly with your broker to ensure compliance with them. The services of a specialist construction broker is an advantage as they can help to explain the requirements and provide expert advice.
Construction Risks UK have been providing insurance to the construction industry for a number of years and can provide technical advice and guidance tailored to your particular circumstances.
