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30 June 2020
The execution of 'hot work' (ie, work which carries the risk of fire) often results in fires. Therefore, anyone who executes or arranges for the execution of hot work should be aware of how damages and possible liability for damages can be avoided. Hot work insurance policies should also be thoroughly examined.
This article highlights the rules that craftspeople, contractors and clients must consider before and during the execution of hot work, as well as the associated liability issues.
The Danish Fire and Security Technical Institute (DBI) developed the rules for hot work. The rules apply to all individuals who work with tools that give off heat. The rules are extensive (consisting of three 90-page volumes) and are great references for practical work.
Further, all craftspeople who execute hot work must complete the relevant courses and understand the rules.
Central to the rules is the standard contract for the execution of hot work. This contract must be signed by the client and the craftsperson before the commencement of any hot work. On signing the agreement, the contractor will arrange for various fire-prevention tasks to be completed. For example, a fire marshal must be appointed.
However, jurisprudence shows that that there is often uncertainty around a fire marshal's obligations. In a 2018 case, the insurance compensation from the craftsperson who caused the fire was reduced by 50% as the fire marshal who should have executed the welding works (a contractor) did not comply with the requirements for fire marshals. The fire marshal was not present with a fire extinguisher but instead observed the welding works from a security camera several minutes walking distance away. The total costs for damages exceeded Dkr20 million.
Craftspeople, contractors and clients must review their insurance – possibly in collaboration with their insurance broker – before the commencement of any hot work. As a minimum, craftspeople and contractors should discuss the following conditions of their insurance contract.
Liability insurance coverage may contain specific criteria that must be met for the coverage to be provided. However, the decision for not providing coverage if the "insured has grossly avoided elementary security measures" should be rejected. Insurance brokers can elaborate on the reasoning and background for this decision.
If a craftsperson incorrectly executes hot work on a roof and thus starts a fire, the amount of liability insurance might be determined to be too low. In such cases, the client or their insurer can demand that the craftsperson cover the expenses connected with the fire and those which exceed the insurance coverage. This figure can be significant. If the work is executed by a subcontractor, it should be predetermined who bears the risk of insufficient coverage. The subcontractor's insurance coverage and ability to pay plays a significant role in this matter.
How significant the excess should be is a key consideration for businesses. However, how a business can best assure a subcontractor who has executed the work should also be considered.
Several insurers have guidance on hot work which can be of further help in this regard.
When hot work causes a fire, clients' (eg, building owners') construction insurance often requires specific conditions for coverage. Therefore, clients must carry out the necessary measures and incorporate these into their business procedures. These measures include as follows:
The consequence of failing to meet these conditions is often an excess charge of, for example, Dkr100,000. Clients could consider whether an agreement with a main contractor should include an assurance that the client need not pay this amount immediately (ie, in the absence of an expert appraisal or court case).
The jurisprudence suggests that it is difficult to convince the courts that the hot work rules have been upheld if a fire has already occurred. Of course, situations may occur where multiple factors lead to a fire – for example, where several different types of craftsperson were on site simultaneously.
If the rules are not upheld, the party seeking recourse must focus on the involved parties, which may include:
Therefore, anyone who executes or arranges for the execution of hot work must understand the rules and the typical distribution of work between clients and entrepreneurs.
The terms regarding sale and delivery are essential to a stable operation. The same can be said for hot work, and can limit potential liability to an appropriate amount. The terms for sale and delivery should always be determined by an insurer, an insurance broker and a lawyer.
For further information on this topic please contact Christian Werenberg at WSCO Advokatpartnerselskab by telephone (+45 3525 3800) or email (email@example.com). The WSCO Advokatpartnerselskab website can be accessed at www.wsco.dk.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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