Aggregation Of Construction Claims

The nature of a construction project gives rise to the possibility of numerous individual defects or losses arising which may be brought together in one or more claims. In a worst case scenario, there may be an underlying design error which is repeated by the insured on various projects, giving rise to multiple claims from different parties under different contracts. When indemnity is sought under the policy for such claim(s), it has to be considered to what extent the losses or liabilities should be grouped together and treated as just one claim for indemnity under the policy, or multiple claims.

The underlying liabilities may be grouped together by various different routes. On the facts and policy wording, the liabilities may comprise only "one claim" against the policy, in which case no further debate arises. Alternatively, express aggregation wording within the policy may bring together the underlying liabilities so that they are treated as a single claim.

Of course, whether it is in the insured's, or insurer's interests for the losses to be aggregated depends entirely upon the limit of indemnity under the policy, the excess, and the number and size of the losses. A slight difference in the wording can, however, make a significant impact upon the amount recoverable under the policy. Say, for example, there is a £2 million claim, which is made up of individual defects, none of which, alone, exceeds the £50,000 each and every claim excess within the policy. If, on the policy wording in place, every defect is treated as a separate claim and no aggregation provisions apply, insurers will have no liability. If the losses are aggregated, the exposure will be the full £2 million, less the...