Your winning ticket for the tender
Certificates of insurance for Contractors All Risks insurance are required by almost every party that takes part in construction projects: Property developers, building contractors, or turnkey contractors participating in government tenders. Each one in their respective field is required to provide a certificate of insurance to the Ministry of Housing, the Israel Land Authority and various other governmental ministries in connection with projects being carried out for or in the framework of entities operating under their auspices, public authorities, local authorities and the like.
These certificates are not only required by public institutions:
In the private sector – Certificates of insurance are also required by private entities taking part in initiating or executing projects who wish to protect themselves by obtaining a letter of undertaking from the insurance company to maintain insurance cover and confirm certain terms to them.
Owners of National Outline Plan 38 projects – Reinforcement or demolition and rebuilding of residential buildings.
Owners of various types of National Outline Plan 38 projects who wish to protect themselves against third party claims as well as against damage to the works, the existing building, or the contents of the apartment will also demand certificates of insurance signed by the insurance company of the principal / contractor.
Funding entities such as banks will also request certificates of insurance before providing credit or project funding. It is therefore clear that without such a certificate it will be impossible to win a tender, finalise a deal or obtain credit.
To obtain a quotation for insurance cover tailored to your needs
Please contact me directly
Itzick Simon
972-50-5299480
Certificate of insurance – Better than the insurance policy itself!
In most cases, a certificate of insurance is not only a document outlining principles but in fact substitutes a policy and the contents thereof actually override the insurance policy if the insurance company includes any condition therein that contradicts the policy wording. There is no doubt that in order to obtain the “winning ticket” you need to things to be dealt with properly and it’s preferable for this to be done by a professional insurance agent with expertise in the sector.
Hereunder are several points of specific importance:
The main problem in the process
In most case, anyone bidding in a tender gives an undertaking at the time of submitting the bid to supply a certificate of insurance after winning the tender according to the wording contained in the tender documents, all without approaching the insurance company at this preliminary stage of submitting a bid in the tender to obtain their confirmation or remarks on the wording of the certificate required and the conditions of the tender and its demands.
In such a case there are three possible scenarios:
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The insurance company creates difficulties – and so you need someone to conduct negotiations backwards and forwards with the insurance company and the principal and/or their insurance consultant in order to reach a compromise between the various parties. This process can take time, time that you don’t always have.
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The insurance company accepts the demands of the tender but demands exorbitant premiums for adapting the policy to the conditions of the tender which you might not necessarily be willing or able to pay since these insurance costs make the entire project uneconomical and unfeasible.
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The insurance company refuses to provide the cover – and as a result you have to withdraw from the tender and lose the business.
The process of obtaining a certificate of insurance
In some cases a signed certificate of insurance (as an-principle certificate) need to be attached to the tender bidding documents. In these cases it is easier for all parties involved: The insurance company, the principal, you and us – your service providers – since everyone knows exactly what is expected. The certificate constitutes an in-principle document only however its conditions have already been agreed in advance.
In these cases it is important to pay attention to the deadlines stated in the tender for submitting queries, exceptions or special requests that will be replied to within a specific timeframe – after which the tender bid document must be submitted without any amendment or exception.
However in most cases, the winning bidder in the tender will submit the certificate of insurance only after winning the tender. The tender documents are submitted to the insurance company at this stage and only then will it raise any exceptions, exclusions and protection requirements, may delete certain clauses and amend wordings and the scenarios that the insurance company is unwilling to cover may effectively invalidate the insurance policy that the insured has already taken out. In such a case it is necessary to conduct intensive negotiations with the insurance company and also with the principal, if at all possible.
If there is a need to submit a certificate of insurance to any other party such as a bank, or any other principal and/or legal entity (such as a party to a joint venture) – the same process will take place with them as well.
This is the point where we emphasise the fact that the certificate of insurance and its content are more significant, from a legal perspective, than the insurance policy itself, a situation which results in the insurance company placing great importance on conducting negotiations concerning the clauses appearing in the certificate and the way they are worded.
We have the tools, the knowledge, the experience and the reputation with the insurance company underwriters to obtain certificates of insurance for you, to conduct negotiations with the tender acquirer, the authority or financial entity
You are welcome to call Itzick Simon directly on:
972-50-5299480
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Important information concerning Ministry of Housing tenders
As part of the process of winning the tender, before and after the construction and until the full certificate of occupancy for the project is issued – the property developer will need to provide a certificate of insurance to the State of Israel – Ministry of Housing – Israel Land Authority.
This process involves several stages
Immediately after winning the tender, the developer will need to provide an in-principle certificate of insurance confirming the agreement of the insurance company to cover the project as soon as the project site is taken possession of.
The second stage, insofar as it relates to the insurance cover, creates another difficulty with everything we’ve stated so far.
Stage 05 – Hand-over of the land – defined by the Ministry of Housing as: Hand-over of the borders of the plot to the developer and handing-over the responsibility for the plot to the developer, subject to the developer providing an insurance appendix.
In other words – From the perspective of the Ministry of Housing, the date on which the land is handed-over to the developer for the construction is the time when a detailed certificate of insurance must be issued for the Ministry of Housing, confirming that the insurance policies specified in advance in the tender documents have been arranged, first and foremost Contractors All Risks insurance.
However in actual fact, in most cases, several months and even years can go by between the first stage immediately after winning the tender in which the in-principle certificate of insurance has been provided and the time when the works at the site actually commence. Why? Since the developer has to design the project and obtain construction permits, submit requests for alterations to urban construction plans and the like…
However, according to the demands of the State of Israel, despite the long time that passes between Stage 05 and the time when the actual construction works commence, the Ministry of Housing requires Contractors All Risks insurance from this early stage on. From the perspective of the Ministry of Housing – the land has already been handed-over and they do not have any possibility of monitoring or verifying when the construction works will actually start. Furthermore, from their perspective, any insurance claim arising from any damage which occurs (such as a fire in dry vegetation that spreads to neighbouring houses, a child who is injured playing with and old refrigerator that someone left on the site) is your responsibility. Hence the requirement for full Contractors All Risks insurance as early as Stage 05.
The ramifications of this are quite simply that the insurance costs are not taken into account in calculating the budget and they do not have any clear time limit.
Certicates of insurance for turnkey contractors
A certificate of insurance is a precondition to winning tenders issued by governmental institutions, public authorities, municipalities and the like. This can create very serious difficulties for turnkey contractors since without the certificate – it will not be possible to win the tender. Another stumbling block is that the insurance company is not a rubber stamp! When the tender documents are sent to the insurance company, it will not necessarily agree to issue the certificate unless it is amended and various requirements and additional exclusions are added. The task of conducting negotiations and coordinating between the expectations of each party is exactly the reason why you need an expert and experienced insurance agent who will do the hard work for you.
Certicates of insurance for building contractors
Certificates of insurance are not required only for public and institutional tenders but also for tenders in the private sector. The principal can impose preconditions on the contractor to commencing the project including supplying valid insurance policies such as: Contractors All Risks, Professional Indemnity and Products Liability. A certificate confirming these policies or any other insurance policy required in the format of a certificate of insurance is a preliminary and important stage for the principal that precedes issuing instructions to the contractor to commence the works. The need for such a certificate…
Certicates of insurance for property developers
Certificates of insurance are not required only for public and institutional tenders but also for tenders in the private sector. The principal can impose preconditions on the contractor to commencing the project including supplying valid insurance policies such as: Contractors All Risks, Professional Indemnity and Products Liability. A certificate confirming these policies or any other insurance policy required in the format of a certificate of insurance is a preliminary and important stage for the principal that precedes issuing instructions to the contractor to commence the works. The need for such a certificate…
Certicates of insurance for banks or financial institutions
A certificate of contractor’s insurance policies is not required only by principals but also by banks and financial institutions who wish to ensure that any errors or omissions by the developer or the building contractor are not paid for by the bank and that the money they lend is secure and protected by a valid policy issued by an insurance company that covers all of the risks arising from the works. From the perspective of the bank – the policy is another ring of protection and security in the event of an untoward event. In the same way that the Ministry of Housing requires turnkey contractors participating in state tenders to provide certificates of insurance, so commercial banks require the same for projects in the private sector.