CDM 2015: an insurer’s perspective on risk and claims

Bob Paterson assesses where we are with CDM 2015 now that the end of the six-month transitional period is approaching.

Bob Paterson

The Construction Design and Management Regulations 2015 (CDM 2015) came into force on 6 April 2015 with the intention of making the existing CDM Regulations less complicated, but also extending the CDM Regulations to domestic construction projects.

The previous exemption for domestic projects has been abolished as it did not conform to the latest EU Directive. The new CDM Regulations are an attempt to address the disproportionate number of accidents that occur on smaller projects, when compared to the number of man hours worked on larger projects.

There are a number of significant changes from the previous CDM Regulations which have immediately impacted on the roles and responsibilities of the client, contractor and construction professionals. A principal designer (PD) role replaces the previous CDM coordinator, to be appointed in writing by the client and it is expected that it will be a role undertaken from within the design team.

There is a six-month transitional period for existing construction projects which is now coming to an end. By 5 October 2015, those contracts which are continuing after this date and already have a principal contractor and CDM coordinator, will require the appointment of a PD.

As we move out of the transitional phase, it remains to be seen whether these changes will make CDM 2015 less complicated than its predecessor and if the industry can adjust to the new roles and responsibilities, particularly on lower value projects and in the domestic market.

For the insurance sector, the cost of compliance with CDM 2015 will have to be taken into account in the reserves for property claims and the additional responsibilities on construction professionals considered in their professional liability insurance policies.

For instance, the cost of involving a PD and preparing a health and safety file may be disproportionate to the value of the works undertaken, and contractors, insurers and loss adjusters will need to be aware of this when preparing cost estimates or claim reserves.

CDM 2015 recognises that a domestic client is not the best person to perform the duties required of them and these are passed on to the contractor when appointed (CDM 2015 does not say who carries them out before then). For many small builders who undertake works exclusively for domestic clients, acting as both the principal contractor and the principal designer during the construction stage will be a challenge and an additional cost if, say, CDM consultants have to be employed.

This increased cost will need to be passed to the client (or insurer if funded by them). However, there will be a tendency for less responsible smaller builders to undercut prices by not undertaking their obligations under CDM 2015 and “hope for the best”.

Much will depend on how the Health and Safety Executive (HSE) enforces CDM 2015, particularly in the domestic construction sector and what their prosecution policy will be, otherwise responsible small builders may be driven out of the domestic market.

One of the defined roles of the PD is that when construction starts they must oversee the temporary works design. Certainly the temporary works on a construction project can be a key health and safety concern, more so than the permanent works, but the vast majority of construction contracts correctly leave the responsibility for the design and implementation of the temporary works to the contractor. 

How, for instance, would a single client-appointed PD deal with their obligations to oversee the temporary works on a design-and-build project where the contractor is responsible for the temporary works and employs their own sub-consultant design team?

The solution may be for the design-and-build contractor’s obligations to include the requirement to act as both principal contractor and principal designer during the construction phase, to maintain the single point of responsibility for the temporary works. However, as a project can only have one PD at any one time, the person appointed by the client to fulfil this role at pre-contract stage would then have to resign at the award of the contract to the contractor.

Whether these changes and the implementation of CDM 2015 will have a significant impact in reducing the health and safety risks associated with the construction industry remains to be seen.

In the meantime, as with any significant regulatory change, the cost of implementation will have to be borne by the clients and developers (including insurers), which in this case will also include unsuspecting domestic clients.

Construction managers will also be at the forefront of these changes and in the professional liability sector all construction professionals are advised to ensure they have sufficient professional indemnity cover for any additional duties they may have to perform under CDM 2015, some of which may be unfamiliar to them. If they have any doubts then they should consult their broker.

Bob Paterson is a chartered loss adjuster/civil engineer and the UK & Ireland director of Triton Adjusting