Who picks up the bill for the riots?

The riots and civil unrest that gripped the country since the weekend appear to be subsiding. Thoughts now inevitably turn to the clean up and the losses suffered by homes and businesses affected by the unrest. The construction industry will be no different and even if construction works on site were not physically damaged during the course of the unrest, there will still be losses arising out of down time when the sites were closed on police advice and perhaps additional site security during the course of the disorder.

How do the standard forms deal with the events of the last few days?

The way civil commotion is dealt with under the unamended forms of the two most common forms of construction contract – the JCT and the NEC is markedly different. Under the NEC 3 form of engineering and construction contract, riots and civil commotion (not confined to the Contractor’s employees) are defined as an Employer’s Risk for which the employer is obliged to indemnify the contractor. Further, riots and civil commotion constitute a compensation event which entitles the contractor to a change to the prices and the completion date. It is likely that during contract negotiations, the indemnity provisions will be omitted but if this isn’t the case, they represent an important means of recovery for the Contractor.

Under the JCT forms, riots and civil commotion are treated as a “cost neutral” event similar to adverse weather conditions. They represent a Relevant Event for which the contractor is entitled to apply for an extension of time but not a Relevant Matter which entitles the contractor to claim loss and expense. Riots and civil commotion also provide a specific right to either party to terminate if they cause a suspension of the works for the period set out in the contract particulars. In the NEC form, a general right to terminate exists where the works cannot be completed by the date in the Accepted Programme and there is a delay to completion of more than 13 weeks due to an event neither party could prevent and was so unlikely a Contractor would not have allowed for it.

Are you insured?

Insurance policies should be checked carefully to see if they cover losses arising from riots and civil commotion. Riots and civil commotion do not appear in the definition of what All Risks Insurance must cover in the JCT form, the most frequently used insurance requirement in that form of contract. In the NEC form, the Contractor provides the insurances set out in the Insurance Table. Although damage and loss due to riot and commotion is not expressly excluded, it may be excluded under the terms of the insurance policy. It is therefore more than possible that there may be no valid insurance in place to protect against this risk.

The Riot (Damages) Act 1886

The Riot (Damages) Act 1886 provides a remedy to a party who has suffered loss in the form of damage to physical property or goods as a result of a riot. It is arguable whether the remedy would be limited to the owner of the site and whether damage to part completed works would be covered but it can be seen that the remedy only likely extends to property damage and maybe loss of unfixed materials on site and plant rather than prolongation costs. It is important to note that a claim must be submitted to the relevant Police Authority within 14 days of the damage occurring. If there is valid insurance in place not only must credit be given for insurance compensation received but the notification provisions should be checked carefully.

Gurbinder Grewal is a Senior Associate in the Construction & Engineering team at SNR Denton