Principals arranged insurance (PAI)
PAI is the default insurance provision for public liability (PL) and contract works (CW) cover for both Maintenance Contracts and Capital Projects. The objective of PAI is to have all such contracts properly insured on a known basis with secure insurers at a competitive price.
PAI provides PL and CW cover for contracts up to a value of $100M. Contracts valued between $50M - $100M are classed as ‘referable’ contracts and require specific scrutiny by the insurer providing the PAI cover to ensure they have gained a full understanding of their exposure from these high value contracts.
Further information can be found at the PAI Insurance portal .
Non-PAI
All physical works contracts are required to come under the NZ Transport Agency PAI for PL and CW, the only exceptions are where the contract value is in excess of $100M.
Where a supplier declines the provision of PL and CW cover under PAI, the reasoning behind the decline should be established and discussed with the HNO contact person mentioned above.
Contracts valued at over $100M whilst not being suitable for inclusion in the PAI programme may be suitable for CW and PL cover under a similar form of cover referred to as principals facilitated insurance (PFI). Again contracts that fall into this category should be discussed with the HNO contact person mentioned above.
Professional indemnity (PI)
Professional indemnity (PI) insurance provides protection for businesses and professional persons in respect of legal liability arising from the conduct of their practice or business.
Some contract forms require the contractor to undertake design work. Where design work forms part of a contract under SM031 (eg D&C or ECI) the contractor will be required to take out PI insurance cover.
Further information can be found within section 2.6 of the NZ Transport Agency's Contract procedures manual (SM021) and within clause 8.6 of the Conditions of Contract of NZ Transport Agency's Contract proforma manual (SM031) .
Public liability (PL)
Public liability (PL) insurance is established to provide financial coverage to the insured where they are judged liable under common law for injury or damage sustained by a third party as a result of the insured’s breach of their duty of care. All HNO PW contracts require the establishment of PL insurance cover.
Further information can be found within section 2.7 of the NZ Transport Agency's Contract procedures manual (SM021) and within clause 8.5 of the Conditions of Contract of NZ Transport Agency's Contract proforma manual (SM031) .
Contract works
A contract works (CW) policy provides cover for sudden and accidental physical loss or damage that occurs to the works insured during the construction period. All HNO PW contracts require the establishment of CW cover.
Further information can be found within section 2.7 of the NZ Transport Agency's Contract procedures manual (SM021) and within clause 8.3 or 8.8 of the Conditions of Contract of NZ Transport Agency's Contract proforma manual (SM031) .
Risk and insurance sub-VAC approval
Some contracts require approval from the risk and insurance sub-VAC prior to advertising of tender.
Refer to section 2.7 of NZ Transport Agency's Contract procedures manual (SM021) for physical works requirements.
Appendix XXIIIAppendix XXIII contains the relevant insurance approval request forms (PS, PW, ECI and D&C).
The required and default level of physical works insurances can be found in sections A8, B4, C4 and H3 in the Transport Agency's State highway construction contract proforma manual (SM031) .
The project manager/contract manager is required to discuss their proposal with the Transport Agency's broker (Marsh), gain their sign off and thereafter submit the completed Appendix XXIII to the risk and insurance sub-VAC for approval (via insurance@nzta.govt.nz ).
Motor vehicle and contractors plant
All contracts placed under SM031 require the contractor to take out motor vehicle, and plant equipment insurance.
Further information can be found within section 2.7 of the NZ Transport Agency's Contract procedures manual (SM021) and within clause 8.4 or 8.5 of the Conditions of Contract of NZ Transport Agency's Contract proforma manual (SM031) .
Bonds, retentions and bonds in lieu of retentions
A contractor's performance bond provides NZ Transport Agency security to ensure performance of the contractor's obligations under the contract. This may include completing the work to the specified standard and breach of contract, eg through wrongful termination.
Contractors will be offered a choice in tender documents between the provision of retentions or a bond in lieu of retentions (BILR). Where a BILR is selected the contractor will establish through payment of a premium to a surety provider (usually a bank) a sum of money to be made available should the need for making good defective works be identified.
Further information can be found in sections 2.7 of the NZ Transport Agency's Contract procedures manual (SM021) .
Note: In the event of financial default by any contractor please contact the Transport Agency's Chief Risk Assurance for further instruction.
Global bond
As an alternative to establishing bonds and BILR for individual contracts, the NZ Transport Agency has a facility for the provision of a global bond (GB). The GB facility is available for Capital Project construction contracts up to a value of $20M and for Maintenance (including term Network Maintenance) contracts up to a value of $20M per annum.
Contractors are required to determine their own GB amount, using the Transport Agency's online Global bond calculator .
Note: In the event of financial default by any contractor please contact the Transport Agency's Chief Risk Assurance for further instruction.
Further information can be found in section 2.7 of the NZ Transport Agency's Contract procedures manual (SM021) .
For further information contact insurance@nzta.govt.nz .