Peeters Act and Ducarme Act: which insurance obligation applies to your construction project?
18 02 2020
The construction sector is confronted with the Peeters-Borsus and Peeters-Ducarme laws, which were introduced in 2018 and 2019 respectively for the benefit of all those involved in a construction project. What exactly do these laws entail? How will they affect your construction project? And what insurance solutions can you call on to financially cover your company against the new risks entailed by the legislation?
If things go wrong on a construction site, both the various construction actors and the client are disadvantaged. Additional works/repairs must be carried out and the delivery of the building is delayed. Even after delivery, problems can still arise. To absorb the financial impact of this, the Peeters-Borsus and Peeters-Ducarme laws were created. These laws aim at the financial protection of all parties involved in a construction project by imposing an insurance obligation on the various construction actors.
The Peeters-Borsus and Peeters-Ducarme laws in a nutshell
Since 1 July 2018, the Peeters-Borsus Act has been in force, obliging contractors, architects, engineering firms and other actors involved in a residential construction project to insure ten-year liability. The main motivation for this is to financially absorb problems with stability, solidity and watertightness during construction or renovation works. Previously, only architects were required by law to insure themselves for their ten-year professional liability. “With the introduction of this new insurance obligation, all actors in the construction industry have become more equal,” says Eli Hemelaer, Deputy Director Construction & Engineering at Vanbreda.
On 1 July 2019, the Peeters-Ducarme Act also came into effect. “This law, in addition to the law of 2018, now also obliges the 'intellectual professions' in the construction sector to insure their professional liability. Think of architects, engineers, land surveyors, engineering firms,” says Eli Hemelaer. “The insurance solution developed for this target group covers all professional errors that fall outside the ten-year liability. It deals with intellectual errors such as a mistake made by the surveyor expert in measuring a site. Or a design office that delivers an air conditioning system that is too weak due to an incorrect calculation, causing the energy bill to skyrocket.”
How do the laws differ from each other?
An important difference between the two laws is that the first law only applies to construction projects involving an architect. The second applies to all construction projects, even if no architect is involved. Moreover, the first law only applies to the construction or renovation of homes, while the second law makes no reservations about the type of construction project. “Construction actors should thoroughly check their insurance obligation in advance in order to conclude the correct insurance coverage,” says Eli Hemelaer. “On the other hand, we advise the builders to carefully check the insurance obligation of the construction actors.”
In which cases is insurance compulsory?
Ten-year liability insurance is necessary for a new construction project or a major renovation project. Insurance may also be mandatory for smaller works. “This obligation is there as soon as the stability or watertightness of the building can be compromised and from the moment an architect is involved in the construction project,” says Eli Hemelaer. “A plumber who renovates a bathroom does not in itself perform work that threatens stability and should therefore not be insured. A roofer, on the other hand, must insure himself.”
Don't forget the ten-year liability certificate
The law stipulates that an insurance certificate for ten-year liability must be delivered at the start of the works. This is part of the responsibility of the architect, not the client. The certificate must be available on site at all times. If it turns out that the certificate is missing, the architect is forced to stop the work. Eli Hemelaer: “The bank may also request the certificate as a condition to grant a client credit for a construction project. This only happens sporadically, but know that the certificate must only be there when the work starts and not when the loan is taken out. After all, the ten-year liability only comes into effect upon acceptance of the works.”
Will the house be sold before the end of the ten-year liability period? “Then it is the task of the notary to provide the insurance certificate to the buyer. The notary must check whether there is an insurance certificate,” says Eli Hemelaer.
No certificate is required from the professional liability insurance of the intellectual professions.
Avoid a tangle of insurance policies
There are usually several parties at work on a large construction site. “When something goes wrong, it is often not crystal clear who bears the responsibility. In addition, contractors and architects are not required to insure each party they work with on a project. According to the Peeters Act, they must insure their subcontractors for their professional liability, but not their subcontractors, for example. This means that the different parties on a construction site often have different insurance policies with different insurers,” says Eli Hemelaer. “To avoid discussions about liability between insurers, we recommend taking out a common policy for all parties involved in a particular construction project. This promotes speed and simplicity when handling a claim. Construction actors can insure themselves per project, but it is often more interesting to take out an insurance policy on an annual basis that covers all their projects.”
Building is becoming more expensive but less risky
These recent legislative changes result in an additional insurance cost for the construction industry. Eli Hemelaer: “The contractor and the designers will probably pass on this extra cost to the client. The total cost of a construction project will therefore increase in the following years. The good news is that both the client and all construction actors are now better protected if something happens during the works and this for up to ten years after its acceptance.”
Van Breda - Risk & Benefits