Are the insurance companies allowed to refuse to cover a contractor due to their previous insurance history?
Question:
We are a firm of property developers who need insurance for a project, now that a general contractor has been awarded a tender for the works. The insurance companies we approached asked us to provide them with a certified previous claims experience from the contractor, and when we sent them the documents, all of the insurance companies declined us, citing the negative claims experience of the contractor. What can we do?
Answer:
These days, the insurance companies do indeed check the previous insurance history of the building contractor. If their claims experience in the last five years is negative, they may well decline to provide a quotation.
Like many things in the insurance industry, prevention is better than cure. At the stage when you conduct a construction tender it is advisable to ask the bidder to attach to their quotation for the project, a formal certified claims experience from the insurance companies that have covered projects they have undertaken in the last few years, and it would be advisable to think twice before working with contractors who do not have a clean claims experience.
In the case of doubt, it is possible to contact the insurance company in advance to ask if it would be possible, in principle, to arrange insurance cover for a certain project in view of the resume of the specific contractor.
N.B.: A poor claims experience of a contractor is a red flag, not only for the insurance companies but also for the developer and you should think carefully about working with such a contractor regardless of the insurance. A negative claims experience is quite often an indication of the quality and professionalism of the contractor.
