Sofia inquiry shows need for construction contractor insurance, say insurance brokers

The recommendations made by the board of the public inquiry into the death of Jean Paul Sofia, one of which is that contractors should have their licence made conditional on their having general insurance, have been welcomed by the Association of Insurance Brokers (AIB).

In a statement, the association said it had been “very actively engaged” in the discussions which were held with regards to the amendments in the legislation with regards to the construction sector which started last summer.

“We had at the time raised our concerns on the legislation which was being proposed at the time since we believed that it was weak and that it was going to be very difficult to ensure compliance,” it said.

“To this effect, we welcomed the Government’s initial draft which made Insurance Coverage a pre-requisite in obtaining and renewing a contractor’s license but were disappointed that this was watered down in the final text putting insurance as a requirement without any minimum limits.”

Speaking to BusinessNow.mt, AIB chairperson Ramon Mizzi argues that only an annula ‘Contractors All Risks’ policy, not one tied to specific projects, can protect workers, third parties and indeed contractors themselves.

“The liability cover provided by the Contractors All Risks policy is comparable to other compulsory liability insurance covers used across many professional sectors, including notaries and every financial services provider,” he says. “When a client uses notarial or financial services, they know that they are covered should the service provider be at fault of a mistake or negligence.”

Therefore, requiring the issuing of a ‘Contractors All Risks’ insurance policy to the contractor prior to the issuing of their licence will not only facilitate compliance but also protect third parties, argued the AIB.

The AIB is a separate and distinct entity from the Malta Insurance Association (MIA). While the AIB represents brokers, the MIA represents insurers.

The MIA had taken a position against the introduction of this type of all-risk insurance cover for contractors.

“Insurers were not pleased about the idea that such a policy would be a prerequisite to contractor licensing,” explains Mr Mizzi. “The reason is simple – they do not want to insure all the contractors in Malta. This is understandable, of course, and not a new problem – we see the same when it comes to motor insurance, in the case of 18-year-olds with high-powered cars. So that some people will look for insurance and not be able to find a solution is nothing new.”

The problem with contractors not finding insurance, however, runs deeper than when a young person cannot find insurance for their vehicle, since it impacts the contractor’s livelihood as well as that of their employees.

But for Mr Mizzi, the current situation, after the conclusion of the board of inquiry, is one that is ripe for the introduction of such tough measures.

“If the Prime Minister is saying that people who do not up their game should leave the sector, this mandatory all-risk insurance policy would be a very effective way of ensuring that happens.”

He continues: “Insurers’ willingness to insure thus becomes the standard against which contractors are measured – if a contractor is not good enough for the insurer, why should they be good enough to conduct risky operations?”

In a word, such insurance cover as a prerequisite to contractor licensing would be “a good way to choosing between those who are capable and competent, and those who are not.”

The AIB also agrees with the conclusion that compulsory Employers Liability should be introduced for all employers, and not just those in the construction sector.

“Including provisions similar to those which are found in the compulsory motor insurance legislation should ensure that the employers liability policy coverage will have to respond regardless of any contractual limitations which may be found between the employer and his insurer,” it said.

The recommendations which the association had made, at that time, to the Building and Construction Authority (BCA), have now been mirrored in the public inquiry’s conclusions, said the AIB.

“We believe that there is still a lot of work to be done and we are very willing to continue to contribute towards the strengthening of the legal, regulatory and supervisory framework of the construction industry.”