The starting premise for the scope of the cover is that all reasonable insurable risks identified in the risk analysis should be insured. That is, there has been a considered assessment leading to the preferred coverage that has included certain potentially insurable risks not being covered on the basis of a cost/benefit judgement. Regard should also be had to the Participants own insurances (in some cases some of the Participants might have umbrella policies which does not make it cost effective to take out policies to additionally cover all reasonable insured risks).
The scope of cover offered to project alliances is typically a point of differentiation of brokers. In placing the insurance for a project alliance, the skill of the broker is very important in identifying right insurance markets and presenting the alliance risks. In assessing the scope of coverage the onus should be placed on the broker to demonstrate that:
• the appropriate insurance markets have been approached
• the risks have been appropriately packaged and presented so that the underwriters fully understand the risks being presented
• the scope of coverage is comparable to leading practice.
It is fundamentally understood, particularly in relation to professional indemnity, that the alliance will only provide cover for alliance risks. The professional indemnity risks retained by alliance members is identified in the risk analysis process.