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BAA pioneers 'blame free' insurance for Terminal Five

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CONSULTANTS AND contractors working on the £2.6bn Heathrow Terminal Five project are to be covered by a unique form of 'blame free' professional indemnity (PI) insurance, client BAA said this week.

BAA and its broker Willis hammered out the deal with insurers because conventional PI insurance could not be applied to the airport operator's integrated team working approach to the project.

Conventional PI requires insurers to pinpoint blame for defective design and construction.

Terminal Five construction director Andrew Wolstenholme announced the insurance breakthrough at NCE 's Civils 2002 event last week.

BAA head of group insurance John Witton is also expecting the deal to help keep a lid on costs of the project and make sure the huge new terminal opens on time by removing opportunities for legal argument and delay.

'The deal we have negotiated, we are told by our brokers and insurers, is unique, ' Witton said.

'It fully reflects team participation and for the first time we don't have to identify who specifically is at fault if something goes wrong. All we have to prove is that a professional indemnity type incident has occurred.'

Everyone on the team, from the biggest contractor all the way down the supply chain, is incentivised to avoid PI incidents because they will have to pay their share of the policy excess, up to a maximum of £300,000 per incident.

BAA pays the premium, but in return its costing accountants are expecting a reduction in prices from its suppliers because they do not have to carry the cost of PI for their work on the project themselves.

PI premiums have risen by up to 50% in the last year following the World Trade Center disaster (NCE 22 November). Around 40% of all PI claim costs are estimated to be lawyers' fees, Witton said, highlighting other potential savings.

BAA is considering whether the concept can be applied on other projects.

The Association of Consulting Engineers (ACE) gave a cautious welcome to news of the insurance deal.

'It is a half way house solution and what's needed is an all embracing project insurance, which also encompasses the contractor's failure to perform.

'This is something that the ACE and its insurance advisers are currently working on.'

INFOPLUS www. nceplus.co.uk/magazine/t5

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