7 November 2017

Nigeria: Spate of Building Collapses and the Insurance Industry

Contractors and all persons engaged in building activities must comply with safety standards required in construction sites set by regulators of the industry. A "Person" according to the LSURPDA Act 2010 means "an applicant for or holder of development permits under this Law and includes for the avoidance of doubt, an owner, his servant or agent, consultants, an independent contractor or a builder or a corporate or an unincorporated body registered under the relevant Acts." In other words, all stakeholders in the building sector are required to comply with these standards.

Irrespective of the fact that these safety standards are perceived as very high by a school of thought, they should, in the public interest, be treated as minimum requirements. For instance, besides screening the site away from passers-by, the employees and all who visit the sites are required to wear protective helmets, boots and nose protectors.

The latter is particularly important for employees who work in the cement silos where they inhale a lot of cement particles, which are known to cause asthma, and other breath-related diseases.

Despite these safety standards, accidents still occur in construction sites particularly because operators of equipment and labourers need to move and transport materials from place to place as the phases of the construction work are carried out. Except the contractor is protected through insurance cover, his business might be run aground, if the damage is very significant, with a pervasive social impact.

Here lies the need for contractors to procure insurance products that will insulate them from the financial burden of any accident, no matter how it is caused. The contractor can resolve to have any of the following categories of insurance: Contractors' All Risks Insurance and /or Building in course of Erection All Risks Insurance.

Contractors' All-Risks Insurance

This policy covers almost all the risks associated with construction, which a contractor is likely to face on the site. It is an all-inclusive insurance policy which covers every aspect of civil construction projects including, the engineering and structural works, the temporary buildings erected in the site, the working tools, existing properties of the principal, materials meant for the contract, etc.

It is therefore a good product for such projects as residential/commercial buildings, theatres, factory sheds, warehouses, roads, bridges, dams, reservoirs, tunnels, gas and oil pipelines, water and sewage disposal works, etc.

It provides cover for fire and allied perils, storm, flood, cyclones, tempest, collapse, water damage for wet risks, etc. It also provides cover to third party liabilities in respect of death, bodily injury to persons and damage to third party property.

This is the insurance policy statutorily required to be procured by contractors by the Lagos State Urban and Regional Planning and Development Agencies Act, 2010.

According to Section 48 (1-2) of this LSURPDA Act, "A developer or owner of a construction involving a structure of more than two (2) floors shall at the time of submitting his application to commence building works to the Building Control Agency, submit a General Contractors All Risks Insurance Policy Certificate. An owner or occupier of a building shall within thirty (30) days of service of demand notice, produce the Certificate of Insurance to the Building Control Agency for verification and on an annual basis. The premium payable depends on the nature of the construction work and the construction period of the project. In many cases, it is possible to extend the policy to cover other areas such as storage risks at fabrication sites, breakages of glasses, clearance and removal of debris, surrounding property and excavation, etc.

However, irrespective of the cover and extensions offered, safety standards cannot be compromised. In other words, the fact that this insurance product has been procured does not mean that the contractor will not meet the safety standards prescribed by law and regulations for the industry.

The existence of those minimum standards is a precondition for the procurement of the policy, otherwise, the insurer will be reluctant to provide the required cover or would do so at a higher premium.

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