AMRAE backs plans to clean up construction cover disputes

An article included in a new consumption bill, currently being debated by the French Parliament, is proposing the change. Its goal is to establish minimum standards for certificates used by insurers to price and place mandatory construction liability policies covering the first ten years of a new building’s life. When a construction site is opened, the building firm has to draft a certificate that evaluates the potential liabilities of the project that is then used to negotiate ten-year liability coverage. However, the construction company also has to buy another mandatory coverage, called dommage ouvrage, which guarantees the immediate payment of damages caused to the same building covered by the ten-year liability coverage.hideIn the case of loss the dommage ouvrage coverage is immediately triggered to prefinance any remediation works. The provider of this policy then reclaims compensation from the insurer that placed the ten-year liability policy for any damage it believes is included in the longer coverage. Negotiations between insurers can be prolonged and even reach the courts, especially if one side argues that information contained in the certificate used to obtain the ten-year cover was incorrect. The new bill, backed by AMRAE, plans to standardise those certificates and bring clarity to this messy situation. According to Pascal Dessuet, a member of AMRAE’s board and head of its Construction Commission: “It is an issue that appears very technical, but presents, in terms of financial commitments, an area of concern for all players in the construction sector. “If the policyholder is not capable of coming up with a justification that would prevent the pre-financing insurer to lodge an appeal, the headaches begin, affecting premium prices, the threat of termination of the contract, the exclusion of guarantees and so forth,” he said. Therefore buyers end up caught in the middle of what is effectively a dispute between their insurers. They suffer the consequences of any disagreement, remarked Mr Dessuet, who is also the Head of Insurance for Real Estate Affairs at Société Générale. Although the payment of the loss is not at risk, Mr Dessuet said these disputes are bad for buyers because they end up affecting premium prices and their ability to get future coverage. The Consumption Law, currently being debated in the French Parliament, includes an article that states the French Economy Ministry must define the minimum information to be included in the certificates issued after the completion of a new construction site. Depending on the standards to be defined, it may become less difficult for the insured, and their carriers, to justify the values of the mandatory liability insurance contract, thus reducing the probability that an eventual appeal presented by the pre-financing company will be successful. Mr Dessuet said that the establishment of standards for these certificates is an important initiative because it could reduce the controversies surrounding the payment of claims. AMRAE supports a rigid model that would clearly define the information to be included in the certificates. “The model must be a definitive one in order to prevent insurance companies from continuing to do what they have been doing for the past 30 years,” Mr Dessuet said. “AMRAE’s construction commission is working on this subject, and, as a result, we are capable of presenting a viable proposition about the best model for the certificates.” AMRAE’s scientific committee oversees the combination of such theoretical and practical work. It coordinates all of the association’s research and helps to define the main themes of focus for several AMRAE commissions. It also acts as a catalyst for issues discussed during the annual Rencontres AMRAE. Last year 11 main themes were raised as priorities by the scientific committee, including hot topics such as cybercrimes, e-reputation, supply chain, flood risks and legal developments. AMRAE’s scientific committee is also generating a body of literature on the theme of risk management and related issues. A total of 13 volumes can already be downloaded from the association’s website. Three more are soon to be released. A new initiative has seen the publication of a series named Dialogue in which leading professionals from other areas discuss the links between risk management and their own activities. The first volume of the series was dedicated to legal departments. The next one will focus on IT specialists, said Bénédicte Huot de Luze, CEO of AMRAE. Three risk managers head the permanent scientific committee with three more active members playing their part. Consultants, insurance lawyers and representatives from broker and insurer associations also collaborate with the committee, as well as three academics from well renowned French universities. The association’s scientific work includes initiatives to boost risk management education in France. It has created AMRAE Formation, an entity fully dedicated to the creation of professional risk managers. In addition to itself offering training courses and qualifications, AMRAE is in contact with universities to help introduce risk management to students taking courses in other subject areas.

AMRAE backs plans to clean up construction cover disputes

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