June 1st, 2010

Continental European Legislative and Judicial Trends: Developments in French Compulsory Construction Works Insurance: Amendment of Standard Clauses

Posted at 12:00 PM ET

GC Editor

2010_legislative_thumb-2David Lewin, Managing Director
Contact

In France, construction operations are subject to tight regulations that provide for strict liability under Article 1792 ff. of the Civil Code. Under the Loi Spinetta of 1978, they are also subject to two types of compulsory insurance coverage: insurance of the construction contractor’s decennial liability (assurance de la responsabilité décennale du constructeur) and insurance of damage to the construction works (assurance des dommages à l’ouvrage). The scope of the compulsory coverage is specifically described in standard clauses that have been fixed through Ministerial Order (Arrêté). Article L. 243-8 of the French Insurance Code clearly states that any insurance policy acquired to fulfil compulsory construction insurance is expected to provide guarantees that are at least equal to coverage under the standard clauses. Any wording in a policy that does not comply with the standard clauses and is less favorable to the insured, is presumed to be invalid by the courts.

The standard clauses are attached to Article A. 243-1 of the French Insurance Code. Their last revision by the Ministerial Order dated November 19, 2009 was the most significant in several years. Provisions of this Order came into force on November 28, 2009 (Arrêté du 19 novembre 2009 portant actualisation des clauses-types en matière d’assurance-construction, JO du 27 novembre 2009 p. 20428, also available on the website legifrance.gouv.fr).

The standard clauses applicable to liability insurance (Annex I) and the standard clauses applicable to damage insurance (Annex II) have been reviewed in order to integrate amendments implementing legal provisions of Acts of Parliament (Loi n°2006-1771 du 30 décembre 2006, JO 31 décembre 2006 p. 20228 and Loi n° 2008-735 du 28 juillet 2008, JO 29 juillet 2008 p. 12144) and of a Decree (Décret n° 2008-1466 du 22 décembre 2008, JO 31 décembre 2008 p. 20606).  Additionally, an Annex III has been created that concerns group liability insurance expressly authorized by the Decree dated December 22, 2008.

Annex I and Annex II: Standard Clauses Applicable to
Liability Insurance and to Damage Insurance

- Limit of coverage

The Act dated December 30, 2006 expressly authorized a coverage limit for work on buildings other than homes. Prior to the introduction of this Act, compulsory coverage under contractors guarantee insurance could not be subject to a limit. The limit should be at least equal to the cost of construction (based on the cost declared by the owner) or at least EUR150 million if the cost of construction is larger than this amount.

This limit also applies to coverage of damage to work being constructed, according to a Parliamentary Act of July, 2008. Standard clauses regarding this type of insurance had already referred to the limit of the cost of the construction of the works, but the new Act introduced the option of limiting coverage to EUR150 million.

- Integration of the existing property

According to Article L. 243-1-1 of the French Insurance Code, amended by a Governmental Order dated June 8, 2005, compulsory coverage does not apply to the property existing prior to the construction works, “except for the buildings which are totally incorporated in the new works and become technically inseparable from it.” This information is now reproduced in all the standard clauses (Annexes I, II & III).

Date of Opening of Building Works

When creating compulsory construction insurance in 1978, the Legislator referred to the notion of “statutory declaration of opening (or beginning) of the works” (déclaration règlementaire d’ouverture de chantier, hereafter DROC). The date of the DROC is key as there is a need to establish initiation of compulsory insurance on a specific date. Unfortunately, no definition of the DROC was provided in French regulations until a decree, dated January 5, 2007, was introduced into the French Urbanism Code. Article R. 424-16 of the Code refers to a declaration made to the mayor of the city where the structure will be built, by the person permitted to build (In France, permission to build is granted by the mayor’s office). Now the amended standard clauses refer in principle to either of these situations:

■ The date of the DROC mentioned in Article R. 424-16 of the French Urbanism Code, regarding works for which permission to build is required

■ The date of the first order to work or the date of the actual beginning of work, for construction projects for which permission to build is not required.

Annex III: Standard Clauses Applicable to Group
Liability Insurance

Parallel to lobbying for a change in the limit of coverage, a practice has developed in France where a group policy is used to provide decennial liability coverage in situations where several insureds are required to acquire compulsory coverage.

The Decree dated December 22, 2008 expressly authorizes this practice (Article R. 243-1 of the French Insurance Code). The Ministerial Order dated November 19,2009 creates standard clauses regarding group policies (Annex III attached to Article A. 243-1 of the French Insurance Code). Insurers have entered into an agreement to facilitate, for works with a value exceeding EUR15 million excluding VAT, the underwriting of such group policies.

The group policy complements the many policies purchased by the insureds whose decennial liability is incurred. It works as a second line where the first line is coverage under the individual policy taken out by each insured. The standard clause states that the deductible is equal to the limit of coverage stipulated in the individual policy.

In conclusion, the new standard clauses resulting from the Order dated November 19, 2009 do not really bring innovation, but they clarify elements of existing legal
provisions issued by the Parliament or by the Government. However, standard clauses serve as important references for policy comparison in order to ensure that the policies comply with the regulation of construction compulsory coverage.

It is important to note that the new standard clauses apply to policies in force on November 28, 2009 or acquired after this date. As standard clauses set the minimal coverage for compulsory insurance contracts, it is advisable for insurers operating on the French construction risk market to review the wording of policies in order to check their compliance. In addition, it is recommended that reinsurers closely examine the new standard clauses in order to assess the risk they take when covering insurers acting on the French construction market. As the coverages promulgated in the standard clauses are mandatory, they are considered to be more relevant in cases where different policy wording exists that may be less favorable to the insured.

Category: Casualty

Guy Carpenter & Company, LLC Terms and Conditions of Use

PLEASE READ THESE TERMS AND CONDITIONS OF SERVICE (“TERMS”) BEFORE USING THIS SITE.

By continuing to access or use this site, or any service on this site, you signify your acceptance of the TERMS. From time to time, Guy Carpenter & Company, LLC (“Guy Carpenter”) may modify the TERMS. Accordingly, please continue to review the TERMS whenever accessing or using this site. Your use of this site, or any service on the site, after the posting of modifications to the TERMS will constitute your acceptance of the TERMS, as modified. If, at any time, you do not wish to accept the TERMS, you may not use the site. Any terms or conditions proposed by you that are in addition to or which conflict with the TERMS are expressly rejected by Guy Carpenter and shall be of no force or effect.

1. User Assent to Terms and Conditions of Service

You represent that you have read and agree to be bound by the TERMS for GCCapitalIdeas.com. You further agree: (i) to comply with U.S. law regarding the transmission of any data obtained from the Service (as defined herein) in accordance with the TERMS; (ii) not to use the Service for illegal purposes; and (iii) not to interfere or disrupt networks connected to the Service.

2. Disclaimer

All content provided on this Web site is based upon information which we believe to be reliable and should be understood to be general insurance information only. It is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Consult your reinsurance/insurance advisors with respect to individual coverage issues.

Guy Carpenter makes no representations or warranties, express or implied, with respect to the accuracy or reliability of the content contained on this Web site. Readers are cautioned not to place undue reliance on any historical, current or forward-looking statements. Guy Carpenter undertakes no obligation to update or revise publicly any historical, current or forward-looking statements, whether as a result of new information, research, future events or otherwise.

Statements concerning, tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants, and may not be relied upon as tax, accounting, legal or regulatory advice which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas.

3. Intellectual Property

This Web site, including, but not limited to, text, content, photographs, video, audio, and graphics (the “Service”), is protected by copyrights, trademarks, service marks, international treaties and/or other proprietary rights and laws of the U.S. and other countries. The Service is also protected as a collective work or compilation under U.S. copyright and other laws and treaties. All individual articles, columns and other elements making up the Service are also copyrighted works. You agree to abide by all applicable copyright and other laws, as well as any additional copyright notices or restrictions contained in the Service.

4. Restrictions on Use

You may not use the Service for any illegal purpose or in any manner inconsistent with the TERMS. You agree to use the Service solely for the use and benefit of your own organization, and not for resale or other transfer to, or use by or for the benefit of, any other person or entity. You agree not to use, transfer, distribute or dispose of any information contained in the Service in any manner that could compete with the business of Guy Carpenter. You acknowledge that the Service has been developed, compiled, prepared, revised, selected and arranged by Guy Carpenter and others (including certain other information sources) through the application of methods and standards of judgment developed and applied through the expenditure of substantial time, effort and money and constitutes valuable intellectual property and trade secrets of Guy Carpenter and such others. You agree to protect the proprietary rights of Guy Carpenter and all others having rights in the Service during and after the term of this agreement and to comply with all reasonable written requests made by Guy Carpenter or its suppliers of content, equipment or otherwise (“Suppliers”) to protect their and others’ contractual, statutory and common law rights in the Service. You agree to notify Guy Carpenter in writing promptly upon becoming aware of any unauthorized access or use of the Service by any party or of any claim that the Service infringes upon any copyright, trademark or other contractual, statutory or common law rights.

5. Further Restrictions on Use

You may not copy, reproduce, recompile, decompile, disassemble, reverse engineer, distribute, publish, display, perform, modify, upload to, create derivative works from, transmit or in any way exploit any part of the Service, except that you may download material from the Service and/or make print copies for use within your organization, provided that all copies retain all copyright and other proprietary notices. The analysis and presentation included in the Service may not be recirculated, redistributed or published by you without Guy Carpenter’s prior written consent. Modification of the Service’s content would be a violation of Guy Carpenter’s copyright and other proprietary rights. Additionally, you may not offer any part of the Service for sale or distribute it over any other medium including but not limited to over-the-air television or radio broadcast, a computer network or hyperlink framing on the internet without the prior written consent of Guy Carpenter. The Service and the information contained therein may not be used to construct a database of any kind. Nor may the Service be stored (in its entirety or in any part) in databases for access by you or any third party or to distribute any database services containing all or part of the Service. You may not use the Service in any way to improve the quality of any data sold or contributed by you to any third party. Furthermore, you may not use any of Guy Carpenter’s names or marks in any manner that creates the impression such names or marks belong to or are associated with you or imply any endorsement by Guy Carpenter, and you acknowledge that you have no ownership rights in and to any of these names or marks. You will not use the Service, the information contained therein or any of Guy Carpenter’s names or marks in unsolicited mailings or spam material and will not spam or send unsolicited mailings to any person or entity using the Service.

6. License

You acquire no rights or licenses in or to the Service and materials contained therein other than the limited right to utilize the Service in accordance with the TERMS.

7. Rights Reserved

All present and future rights in and to trade secrets, patents, copyrights, trade names, trademarks, service marks, databases, know-how and other proprietary rights of any type under the laws of any governmental authority, domestic or foreign, including rights in and to all applications and registrations relating to the Service (the “IP Rights”) shall, as between you and Guy Carpenter, at all times be and remain the sole and exclusive property of Guy Carpenter. All present and future rights in and title to the Service (including the right to exploit the Service and any portions of the Service over any present or future technology) are reserved to Guy Carpenter.

8. Disclaimer and Limitation of Liability

You agree that your use of the Service is at your sole risk and acknowledge that the Service and anything contained therein, including, but not limited to, content, services, goods or advertisements (the “Items”) are provided “AS IS” and that Guy Carpenter makes no warranty of any kind, express or implied, as to the Items, including, but not limited to, merchantability, noninfringement, title or fitness for a particular purpose or use. Guy Carpenter does not warrant that the Service is compatible with your equipment or is free of errors or viruses, worms or “Trojan horses” and is not liable for any damage you may suffer as a result of such destructive features. You agree that Guy Carpenter, its Suppliers and its third-party agents shall have no responsibility or liability for: (i) any injury or damages, whether caused by the negligence of Guy Carpenter, its employees, subcontractors, agents, Suppliers or otherwise arising in connection with the Service; or (ii) any fault, inaccuracy, omission, delay or any other failure in the Service caused by your computer equipment or arising from your use of the Service on such equipment. The content of other Web sites, services, goods or advertisements that may be linked to the Service is not maintained or controlled by Guy Carpenter. Guy Carpenter is therefore not responsible for the availability, content or accuracy of other Web sites, services or goods that may be linked to, or advertised on, the Service. Guy Carpenter does not: (a) make any warranty, express or implied, with respect to the use of the links provided on, or to, the Service; (b) guarantee the accuracy, completeness, usefulness or adequacy of any other Web sites, services, goods or advertisements that may be linked to the Service; or (c) make any endorsement, express or implied, of any other Web sites, services, goods or advertisements that may be linked to the Service. Guy Carpenter is also not responsible for the reliability or continued availability of the telephone lines and equipment you use to access the Service. You understand that Guy Carpenter and/or third-party contributors to the Service may choose at any time to inhibit or prohibit their content from being accessed under the TERMS.

9. Limitation of Liability

UNDER NO CIRCUMSTANCES, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, SHALL GUY CARPENTER, ITS SUPPLIERS OR ITS THIRD-PARTY AGENTS BE LIABLE TO YOU OR ANY THIRD PARTY FOR DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES EVEN IF AN AUTHORIZED REPRESENTATIVE OF GUY CARPENTER HAS BEEN ADVISED SPECIFICALLY OF THE POSSIBILITY OF SUCH DAMAGES, ARISING FROM USE OF OR INABILITY TO USE THE SERVICE OR ANY LINKS OR ITEMS ON THE SERVICE OR ANY PROVISION OF THE TERMS, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. (Applicable law may not allow the limitation or exclusion of liability or incidental or consequential damages.)

10. Representations and Warranties

You represent, warrant and covenant that you: (i) have the power and authority to enter into this agreement; (ii) are at least eighteen (18) years old; (iii) shall not use any rights granted hereunder for any unlawful purpose; and (iv) shall use the Service only as set forth in these TERMS.

11. Indemnification

You agree, at your own expense, to indemnify, defend and hold harmless Guy Carpenter and its employees, representatives, Suppliers and agents, against any claim, suit, action or other proceeding, to the extent based on or arising in connection with your use of the Service, or any links on the Service, including, but not limited to: (i) your use or someone using your computer’s use of the Service; (ii) a violation of the TERMS by you or anyone using your computer; (iii) a claim that any use of the Service by you or someone using your computer infringes any IP Right (as herein defined) of any third party, or any right of personality or publicity, is libelous or defamatory, or otherwise results in injury or damage to any third party; (iv) any deletions, additions, insertions or alterations to, or any unauthorized use of, the Service by you or someone using your computer; or (v) any misrepresentation or breach of representation, warranty or covenant made by you contained herein. You agree to pay any and all costs, damages and expenses (including reasonable attorneys’ fees) and costs awarded against or incurred by or in connection with or arising from any such claim, suit, action or proceeding.

12. Termination

Either you or Guy Carpenter may terminate this agreement with or without cause at any time and effective immediately. You may terminate by discontinuing use of the Service and destroying all materials obtained from the Service. This agreement will terminate immediately without notice from Guy Carpenter if Guy Carpenter determines, in its sole discretion, that you have failed to comply with any provision of these TERMS. Upon termination by you or upon notice of termination by Guy Carpenter , you must promptly destroy all materials obtained from the Service and any copies thereof. Sections 2, 3, 4, 5, 8, 9, 11, 12, and 13 shall survive any termination of this agreement.

13. Governing Law

These TERMS shall be governed and construed in accordance with the laws of the United States of America and the State of New York, without giving effect to conflicts-of-law principles thereof. You agree to submit to the personal jurisdiction of the state and federal courts located in New York County with respect to any legal proceedings arising out of this agreement and waive any objection to the propriety or convenience of venue in such courts. If any provision of the TERMS is found by a court of competent jurisdiction to be invalid or unenforceable, such provision shall be enforced to the maximum extent permissible and the other provisions of the TERMS shall remain in full force and effect.

14. Access Outside the United States

If you choose to access the Service from outside the United States, you are responsible for compliance with foreign and local laws. Software from the Service may be subject to United States export controls that prohibit downloading, exportation or re-exportation: (i) into (or to a national or resident of) Cuba, Iraq, Libya, Iran, Syria, Sudan, or any other country to which the U.S. has embargoed goods; or (ii) to anyone on the U.S. Treasury Department’s Table of Deny Orders. By using the Service, you represent and warrant that you are not located in, controlled by or a national or resident of any such country or on any such list.

15. Miscellaneous

You acknowledge that Guy Carpenter has the right to change the content or technical specifications of any aspect of the Service at any time at Guy Carpenter’s sole discretion. You further accept that such changes may result in your being unable to access the Service.

16. Official Correspondence

Official Correspondence must be sent via postal mail to: Guy Carpenter & Company, LLC, 1166 Avenue of the Americas, New York, NY 10036, Attn: Legal Department.