NZ Transport Agency PAI FAQ

This information, together with any documentation contained on this web site is provided to assist NZTA Contractors, Subcontractors and their Consultants on the Transport Agency's Principal Arranged Insurance programme.

Question: What contracts can go under the Annual PAI?

Answer: All HNO Physical Works contracts (Capital Projects, Minor Works & Safety Projects and Network Maintenance) with a value of less than $200M can automatically go under the PAI. However, under our current insurance arrangements certain contracts need to be declared to our insurers. Contracts in excess of $200M or that fall outside the contract thresholds for bridges, tunnels, wet works or construction periods and defects liability periods are also assessed for PAI suitability on a case by case basis.

Question: Which Insurance Schedules does PAI impact?

Answer: If the contract is to align to NZS 3910:2013, or any other NZS 2013 suite contract conditions, then the 9th and 12th schedules applicable to the contract conditions should be downloaded from this portal and included with the contract documentation replacing the schedules currently contained therein. If the contract is under NZS 3910:2003 then the 7th and 8th schedules can be provided on request.

Question: What happens if a contract is not suitable for inclusion within the Annual PAI?

Answer: At the agreement of the insurers, contracts >$200M can usually be included under the annual PAI. Contracts that are significantly over $200M or fall outside the PAI will have project specific policies arranged by the Transport Agency.

Question: What effect does the inclusion of bridge, tunnel or wet works have on PAI?

Answer: It may need to be referred to insurers. Refer below list of contracts that need to be declared to insurers:

(a) Where the original estimated Contract Value exceeds $200,000,000

(b) Where the original estimated Construction Period exceeds 36 months

(d) Tunnels where the value of the structure is more than $5,000,000

(e) Bridges where the value of the structure is more than $25,000,000

(f) Wet works where the original estimated Contract Value exceeds $25,000,000

For the purposes of this condition, bridge referrals shall include: new builds; deck replacements; any structural abutment or support works; or structural additions to existing bridge structures.

For the purposes of this condition, bridge referrals shall not include: bridge maintenance or inspection work; bridge resurfacing; work around a bridge structure that includes tie in works to the bridge; or work adjacent to an existing bridge not involving the bridge.

Question: What happens if the winning tenderer does not want to be covered under PAI?

Answer: PAI is the Transport Agency's preferred insurance method. The suppliers are made aware that it will be used on the contracts within the RFT. However, nothing prohibits a contractor purchasing separate insurance cover at their own costs, should they wish to do so.

Question: In a NZS3916 contract does the contractor enjoy any Professional Indemnity (PI) cover for the design he is contracted to do?

Answer: There is no PAI Annual PI cover. While NZS3916 does have some slightly different options, the form of contract itself, be it 3910, 3916, or 3917, does not change the responsibility for the Contractor to insure for PI. The default position under 3916 is that the contractor should insure for PI. It would take an agreement with the Transport Agency to change the contract standard and for the Transport Agency to provide the insurance and cover the contractor. The only situation where a joint PI policy might be arranged is where the contractual structure is an Alliance and responsibility (and liability) is shared.

Question: Is the contractor's plant covered?

Answer: The contract works policy does not insure the contractor's plant and it is contractor's responsibility to ensure their own plant and tools.

Question: With respect to the Principal Arranged Public Liability Insurance, the NZTA Public Liability policy wording states that the Principal's arranged public liability insurance only applies over and above any other valid and collectable insurance. How does it work?

Answer: Where the Transport Agency agrees to provide the public liability insurance, clause 4.15 "Other Insurance" is not applicable, and the Transport Agency's Public Liability will respond first in the event of a claim. The intent of the PAI is that it is the primary policy and it will respond, subject to policy terms and conditions, to claims arising out of insured contracts. Most Public Liability policies arranged by contractors provide cover "where required by contract or where the contractor is obliged to insure or has agreed to insure." Where the contract expressly states that the PAI will apply, the contractor is not required to insure for the public liability and therefore, the contractor does not hold "other insurance".

Question: What is a Material Fact?

Answer: A Material Fact is defined as one that would influence a prudent insurer in accepting or rating a risk. For example, estimated contract values are increased by more than 15%, changes in design or methodology which differs significantly from original tender, any geotechnical or environmental issues which may increase potential risks and so on. The standard rule is…. If in doubt, DISCLOSE!

Question: What happens if a new material fact or change in material fact is not advised to the insurer?

Answer: Failure to disclose material facts may result in the Insurer denying a claim or reduce the amount of settlement, or void the policy altogether.

Question: When does my responsibility to declare material facts apply?

Answer: Throughout the life of the contract. The obligation to declare material facts does not end once the insurance is in place, insurance is a contract of "utmost good faith" and there is a responsibility on both parties to declare information critical to the insurance as soon as they become aware of it - including during the defects liability period (DLP).

Question: Is Pollution liability covered?

Answer: The public liability policy contains a pollution exclusion except for pollution occurrences that are sudden, identifiable, unexpected, accidental, and unintended. It is possible to buy a separate Environmental or Pollution Liability coverage from the insurance market if one is needed. This separate cover could provide cover for the following environmental situations – asbestos, gradual pollution, natural resource damage, clean-up costs for land owned or leased, clean-up costs if ordered by a regulatory authority, civil fines and penalties, and business interruption. It will also cover the defence costs of a regulatory authority investigation which will not be covered under the public liability policy.

Question: Does the General Liability policy cover defective materials or workmanship?

Answer: The General Liability policy does not cover the cost to fix defective materials or faulty workmanship. Rather, the liability coverage comes to play when defective workmanship or faulty material has subsequently caused injury or damage other than to the insured contract or work.

Question: Is liability arising from a watercraft covered under the annual PAI?

Answer: The General Liability does provide cover for liability arising from watercraft provided the watercraft does not exceed 20 metres in length.

Question: Is liability arising from an unmanned aerial vehicle (UAV) or drone covered under the annual PAI?

Answer: The General Liability policy does cover liability arising from UAVs and drones provided it is complies with, and is operated in accordance with local government and central government (CAA) laws, bylaws, rules or regulations. The drone or UAV must not be used to carry cargo (other than camera equipment), or exceed an individual gross weight on 25kg. It must also be operated by the Insured from a ground based controller.

Question: Which policy wording would apply to a project that is spread over several years?

Answer: (a) The Contract Works policy is a "contracts attaching" wording. The Contract Works policy wording that applies throughout the duration of the contract is that which is in force at the commencement of the project, even if the project stretches over multi-years. (b) The General Liability policy is on an "Occurrence" wording. It is with the General Liability policy and insurer(s) that is current at the time of the alleged negligent occurrence that a claim would be lodged. (c) Network Outcome Contracts are covered by the wording in place at the time of the loss.

Question: Is work to rectify defects identified outside the contract defect period protected by the Contract Works policy?

Answer: No. The Contract Works policy provides cover "as required by contract". Once a defect period has expired the contract is effectively complete. There is no contractual responsibility for a contractor to rectify defects discovered outside the contractual defect period and therefore there would be no coverage under the Contract Works policy in relation to the rectification work unless a "new" contract was executed for the rectification work.

Question: If rectification work is carried out during the Defect period, does the policy timeframe extend (if a new defect period applies to the rectification work)?

Answer: Yes. If the contract states that a new defect period applies to any work that is carried out under the contract during the defect period, then the policy will likewise extend in relation to that specific work only.

Question: Is the Unsealed Road limit per lane kilometre? (5kms any one work face, 10km in total any one contract)

Answer: No the limitation is lineal. Regardless of the number of lanes the limit applies to the lineal length of road.

Question: Does cover attach to the policy at contract award or contract commencement?

Answer: Coverage attaches from the start date of the contract i.e. the commencement of physical works.