Construction insurance in the Arab Gulf area : an analysis of cover and contracts
Important problems have been frequently encountered in connection with the insurance covers of projects in the Arab Gulf Area. An attempt to investigate such problems and recommend solutions thereto is given in this thesis. The investigation started by a study of the economic and the legal background, the legal liabilities of the parties to the construction project and the insurance market background and practices in the area. Analysis of the insurance requirement contract conditions forms used in the ambiguities, shortfalls etc. therein, lack of insurance awareness, resulted ance covers asked for and led to most clauses in the main area, revealed many which, in addition to in inadequate insurproblems encountered. Investigation of 453 losses showed that in many claims, inadequate covers asked for and obtained resulted in amounts claimed being either much reduced or wholly repudiated. Delays in settlements following disputes were therefore frequent. In some cases significant losses occurred, seriously affecting contractors with limited means, as the losses were totally or partially not covered under the CAR policies they asked for. Analysis of 1573 CAR/EAR policies showed the present low adequacy of cover. A system adopted in some cases, for checking CAR policies, improved their protection level, to the benefit of contractors, principals and insurers. To assist engineersf accountants etc., who are not insurance experts but deal with CAR policies, an index has been formulated in the thesis to measure adequacy of cover thereunder. A limited random sample survey among contractors, employers and consulting engineers showed that they think the index would be very useful and they welcomed the idea. The study confirmed that insurers are losing a sizable portion of the market left uninsured whether totally or partially. If properly arranged, these additional covers would widen insurers' market base and protect employers and contractors at relatively small cost. To remedy the position, recommendations are given in the thesis for a suggested new wording of the insurance requirement clauses in the contract conditions. The new wording seeks clarity and adequate protection for contractors and employers without departing from normal insurance practices. Other recommendations given suggested implementing some practical steps for improvement, including the use of the aforementioned index to initiate better understanding and increased demand for more adequate construction insurance covers.