UNDERSTANDING DECENNIAL LIABILITY INSURANCE

With Mauritius’ growing construction sector, this guide provides comprehensive insights into Decennial Liability Insurance, also referred to Inherent Defect Insurance (IDI), by addressing the fundamentals aspects of this coverage and how we can assist you in obtaining suitable protection tailored to your needs.

Unforeseen issues with the design and construction of a building, or any other types of man-made structure can cause a chain of events of dangerous proportions. This has been proven by dramatic, tragic and costly incidents over the years.

Decennial Liability Insurance

Inherent defects to load-bearing elements can impair the structural integrity and give rise to partial or total loss. Elements such as foundations, columns, walls, beams and slabs are essential to the stability of a property. Causes of inherent defects are various and can be due to a combination of many factors including but not limited to, deficiencies in design and construction, defective material and workmanship, problems associated with foundations or unforeseen ground conditions.

This insurance provides building owners a long-term warranty against material damages caused by structural defects.

Decennial Liability Insurance compared to other Insurances

Material damage caused by inherent defects is not covered by a property policy unless the damage is a consequence of a covered event such as fire or natural catastrophe.

The Decennial Liability policy complements a property policy by providing indemnity on the basis of the existence of the defect.

Unlike a Professional Indemnity Policy, for Decennial Liability, evidence of damage is sufficient to trigger the policy.

Basis of Indemnity

Subject to the terms and conditions of the policy, a loss is typically indemnified as per below;

• Collapse – the cost of reconstruction, repair or rebuild of the damaged section of the building to the same condition as it was before the incident
• Threat of Collapse – cost of remedial measures taken to prevent a collapse

Material damage to non-structural elements as a direct consequence of an indemnifiable loss is covered. This may include finishes, partitions, electrical components and internal fittings. For this reason, the values of those elements must be included in the Sum Insured.

Non-Industrial Buildings;

• Individual Houses, detached, semi-detached or terraced
• Multi-Storey residential buildings
• Office and Commercial Buildings
• Educational institutions (schools and universities)
• Leisure establishments (hotels and restaurants)
• Entertainment facilities (cinema and theatres)
• Gymnasium, multi-purpose buildings
• Industrial Buildings;

All buildings dedicated to industrial use such as;

Factory Buildings

• Warehouses
• Airport Terminals
• However, industrial processing facilities, production machinery and equipment, assembly manufacturing lines, energy production and storage units are not insurable under a Decennial Liability

Civil Engineering Works

Only specific constructions may be considered as insurable under a Decennial Liability policy and these are principally;

Bridges, walkways

• Civil Engineering works supporting Industrial Plants under certain conditions
• Period of Insurance

Coverage starts on the date of the project’s completion, after receipt review and acceptance of all necessary reports, and runs for a period of 10 years. Since inherent defect can manifest themselves over a longer period of time, this duration helps to optimise the benefits of coverage. Policies cannot be cancelled after date of completion and once coverage has been provided.

Sum Insured

The basic guideline of this kind of insurance is to consider the final construction cost of the completed property. This will consist of the different parts of the work contract and will be determined on the date of acceptance.

The following elements must be taken into consideration to determine the insured value,

Fees and Survey Costs
Survey and technical records, architects and design fees, the building’s loadbearing elements that ensure the stability and solidity of the property such as foundations, walls, columns and pillars, stairs, slabs, floors, beams, portal frames and roofs

Walls and Roofing
All fixed elements of partitions, roofs, gables and facades including those that does not provide stability.

Finishes and building’s fittings

• All finishes and wall surfaces such as wallpaper, tiling
• Electrical fittings, sanitary installations, plumbing and fittings for heating and telecommunications
• False ceilings and partition walls
• Any fitted or built in closed or covered elements

Not included as part of the insured value

All Special Equipment

Machines and apparatus designed for industrial use, all specialised apparatus and installations contained in hospitals, schools, industrial, commercial or leisure establishments including furnitures.

All External Features

Waste dumps, gardens and green areas, access roads, parking areas, exterior subterranean pipes, sport facilities (tennis courts, outdoor swimming pools, golf courses, etc.)

Cost of Land

It covers the building’s structure only, and does not include the land it sits on.

Extensions of Cover (optional)

The available extensions are the following;

Debris Removal and Demolition Cost

This guarantee is offered with a sub-limit up to a maximum of 10% of the amount of claims.

Waterproofing

The nature of this cover requires specific attention and is granted only after a one-year grace period. A specific report must be issued by a Technical Inspection Services (TIS) company at the end of this period. Additional premium applies.

The rights of the policy can be transferred if the property ownership changes hands

• The potential risk of insolvency can be mitigated
• The property sale is enhanced with a valuable product, giving certainty of protection against defects on their new property
• The role of the Technical Inspection Company

As a prerequisite to coverage, a Technical Inspection Services (TIS) company must be appointed by the developer. The TIS company should be approved by the insurance company and appointed preferably during the design phase but in any case, before work starts on site.

The role of the TIS is to review the design and inspect the construction to ensure that;

The design is in accordance with standard codes of practice

• Construction details and procedures reflect the design intent
• The quality of construction material is adequate
• Particular local phenomena are taken into account
• The ground is safe for construction - the load bearing pressures and foundation design reflect the recommendations of the ground investigation report
• Technical reports submitted by the company during the project, range from the initial presentation to the final and satisfactory report at completion.

Once Insurers are satisfied with the reports, coverage can begin.

Any reservation in the TIS report will lead to further technical investigation or eventual exclusion of specific items from the policy.

The use of the TIS is of great benefit to all parties by optimising construction quality and enabling insurers to judge the insurability of the risk.

Since the strength of Decennial Liability lies in the technical inspection during the construction of a building, coverage cannot be provided to completed buildings.

Backed by our strong partnerships with international stakeholders, market relevant underwriting experience and claims handling expertise, we are a committed leader in Decennial Liability. The team provides quotations and technical assistance tailored to each project’s needs, providing specific and client centric solutions and we cooperate closely with specialist technical controllers.

With our technical expertise, in-depth market knowledge and profound understanding of the stakeholder profile and unique local characteristics, we are able to cater for a broad spectrum of needs.