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Mandatory 10-year liability insurance for construction contractors in Belgium as of July 1, 2018

Insurance Consulting and Technology|Property|Risk Control and Claims Advocacy
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February 17, 2018

The new law obliges all building partners who are subject to the classic ten-year liability to take out an insurance policy that covers this liability.

On June 9, 2017, the Act of May 31, 2017 on mandatory insurance for the ten-year civil liability of contractors, architects and other service providers in the construction sector (design offices, engineers and so on) was published in the Belgian Official Journal.

The law obliges all building partners who are subject to the classic ten-year liability to take out an insurance policy that covers this liability, in so far as they do work on homes or apartments for which an architect’s intervention is required. Commercial and civil construction projects are not covered by the new regulation.

Why this new regulation?

The law has a twofold purpose. Firstly, it wishes to put an end to the discrimination that was found by the Constitutional Court (in its decision of July 12, 2007) where only one of the partners in the construction process – namely, the architect – was legally obliged to take out a professional liability insurance policy. Secondly, the law wants to better regulate the construction market and better protect the various players.

What does the liability insurance cover?

The liability insurance relates only to cases of damage to the closed rough structure due to defects that fall under the ten-year liability – such as problems with the stability, strength and watertightness of a residence.

The coverage must, per claim and for the total of the material and immaterial damage, amount to at least € 500,000 if the value of the reconstruction of the building exceeds € 500,000, or the actual value of the reconstruction of the building if the value of the reconstruction is below € 500,000. This amount concerns the reconstruction of the entire building (for example, an apartment building and not the individual apartments). The insurance will not cover aesthetic harm or purely non-material damage, nor will it intervene for material damage not exceeding the amount of € 2,500.

Obligations for the contractors, the other service providers, the principal and the notary public

The contractors and the other service providers in the construction sector are obliged to submit an insurance certificate to the principal, the architect and the NSSO before they commence a residential construction project. The architect must verify whether the contractors and the other service providers possess such an insurance certificate. In turn, the law obliges the principal to furnish the certificate to the bank if he concluded a loan for the works. When selling a residence before the ten-year period has expired, the notary public must make sure that the certificate is turned over to the new owner.

Obligations for the architects

For the architects themselves, the verification will take place through periodic reports from the insurance companies to the Council of the Order of Architects: who has concluded an insurance policy, who has had his insurance cancelled or who was suspended? Moreover, in the architectural contract with the principal, the architects must state the name of the insurance company, the policy number and the contact information of the Council of the Order of Architects.

Amendments to the Act of February 20, 1939

Finally, the law also changes several articles from the Act of February 20, 1939 on the protection of the title and the profession of architect. The most important change is that the general insurance duty of architects disappears, as a result of which – effective as of July 1, 2018 – they are provisionally only still obliged to conclude a ten-year liability insurance for the construction of a residence. It is expected that more legislation will follow on this.

In practice

The law will enter into effect on July 1, 2018, with the exception of the articles relating to the Pricing Agency that regulates the insurance for construction actors who don’t find any insurance on the regular market. These articles are already in effect since December 1, 2017, since the legislature wanted to avoid that certain construction actors could suddenly no longer be able to continue their activities due to a lack of insurance.

The provisions of the law and of the implementing decrees yet to be published will be applicable to policies taken out as of the entry into force of the law and its implementing decrees. The insurance companies will have to adapt the insurance policies and documents at the latest on the date of change, renewal, extension or transformation of the current contracts.

Conclusion

The new regulation is good for owners of a home or apartment, but at the same time entails additional (administrative) charges and costs for contractors, architects, design offices/engineers and notaries public.

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