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Consultants fear bankruptcy over terrorism claims

TERRORIST ATTACKS could bankrupt consultants who face resulting claims from building owners, the Association of Consulting Engineers warned this week.

It has written to construction minister Nigel Griffiths urging him to consider new laws excluding consultants from terrorism related risk.

They also want him to consider setting up an insurance fund using public and private sector cash to pay claims made by victims of attacks on buildings.

Terrorism was excluded from professional indemnity (PI) policies following the 11 September 2001 in the US, which cost insurers an estimated £32bn (NCE 13 September 2001).

Insurers claimed they could not price for a risk such as terrorism, which is impossible to predict.

As a result, consultants now face having to pay claims for damage resulting from a terrorist event, said security and engineering consultant MFD International director John Moore.

Moore warned that the consultant will refuse to design for terrorist attacks, because if it did so, its work would be uninsured.

'The absence of PI means that engineers are being prevented from doing their job.

If I'm told to design a building to withstand the blast from 1t of TNT 1m from the facade, I know that'll create a pressure wave with definable characteristics. It's a normal engineering challenge like working out wind loading.

'If I carry out my design in accordance with that specification and it fails to perform, I would be liable. But the exclusion (in PI policies) prevents me engaging in that engineering exercise.'

The ACE is now advising engineers to extract themselves from contractual design performance guarantees, where possible, to ensure they are not wiped out by claims.

The ACE wants Griffiths to consider three options:

lThe government could accept terrorism as a risk of the nation, and fund victims' claims directly.

lIt could legislate that terrorism risk be covered under the building owner's property insurance.

lThe government could sponsor a PI pool, sharing risk and compensation between a large number of public and private sector organisations.

Such a scheme was set up in the US in 2002.

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