Bill on obligatory ten-year liability insurance for contractors, architects and other service providers in the construction sector

Bill on obligatory ten-year liability insurance for contractors, architects and other service providers in the construction sector

We already reported earlier that the Council of State had to give its opinion on a draft bill concerning obligatory insurance of the ten-year liability for contractors (link to previous newsflash). In the meantime, the Council of State has issued its opinion, and on 12 April 2017 the bill on this obligatory insurance of the ten-year liability for contractors was submitted to the Chamber of Representatives (link to bill).

The key points of the draft bill have been largely retained even after the opinion of the Council of State. 

1. Everyone has to be insured when a dwelling is built

Under the bill, all contractors, architects and other construction actors (principally design firms) will have to take out an insurance policy that covers their ten-year liability as intended in articles 1792 and 2270 CC, for the construction of a dwelling.

For the application of this law, a "dwelling" is described as a building or the part of a building that, from the start of the immovable works, due to its nature is intended exclusively or primarily for habitation by a family or by a single person, and where the various family activities - such as living, sleeping, preparing meals - are exercised. Single-family residences and apartments are mentioned as examples. The Explanatory Memorandum gives as a guideline that a building may be regarded as primarily intended for habitation if more than 50% of the surface area is so intended.

The insurance duty does not apply for shared buildings, where at least a single domicile or a single toilette is used by several persons who do not have any family ties with one another, e.g. student rooms, rooms for seasonal workers, hospitals…

This liability to be insured is that of contractors and architects during a period of ten years after acceptance of the work for defects that impair or can impair the stability of the building or an important element thereof. For this insurance duty the bill states that watertightness defects as well only fall within its scope if they endanger the solidity and stability of the dwelling.

In principle, each of the parties concerned (contractors, architects and other construction actors) whose ten-year liability for stability-threatening defects might be invoked must take out an insurance policy. It is also possible to subscribe to a global insurance for the account of all insured parties. The subcontractors must also be included as insured parties.

In addition, the draft bill also provides the possibility to establish a suretyship instead of the obligatory insurance, whose conditions and modalities of filing and release are defined by the King.

2. Insured amounts

The bill provides that the ten-year liability such as intended in articles 1792 and 2270 CC must be covered by this insurance.

This insurance will not cover any aesthetic harm or purely non-material damage, nor intervene for material damage that does not exceed the amount of 2,500.00 EUR. 

If the reconstruction of the building should exceed the amount of 500,000.00 EUR, at a minimum this amount of 500,000.00 EUR must be insured. It is important to emphasise here that the amount of 500,000.00 EUR concerns the reconstruction of the entire building (e.g. an apartment building) and not the separate dwellings (the apartments).

For buildings with a value lower than 500,000.00 EUR, the full value of the dwelling (and not the building) must be insured.

3. Verification

The bill further provides that contractors and other service providers in the construction sector must present an insurance certificate to the principal and to the architect before they commence any immovable work. 

The architect must verify - on pain of a criminal-law fine - whether an insurance certificate is actually present. Also the NSSO, the lender and the notaries public involved in a later sale have a duty to verify this.

It is expected of each contractor and service provider that they can present the insurance certificate upon first request. Should a violation be found, the actors can be sanctioned with a criminal-law fine ranging anywhere from 26.00 to 10,000.00 EUR.

For architects, the existing arrangement of periodic reports by the insurers to the Council of the Order of Architects and of the obligatory mentions in the architectural contract is taken over.

4. Proposed entry into force

For the moment it is provided that the ultimate law will enter into effect as of 1 July 2018, whereby the duty to take out the obligatory insurance applies for all structures whose definitive urban development permit was issued after the entry into force of the law. 

The provision with regard to the tarification bureau would already enter into effect as of 1 December 2017. By starting up the tarification bureau in advance, the legislature is trying to prevent contractors or other construction actors from being unable to continue their activities due to a lack of insurance.

Thus, anyone who is refused coverage by at least three insurance companies can file a request with the tarification bureau, which will then establish a premium taking the risk of the policyholder into account.

5. Amendments to the Architects Law

Significantly, the bill also changes and repeals several articles of the 1939 Architects Law. For example, article 9 of the Architects Law is fully repealed, so that the insurance duty of the architect on the basis of this law disappears entirely.

This is important because, as a result of this deletion, there will no longer be any obligatory insurance of the ten-year liability of architects for structures that are not intended for habitation or for defects that do not affect stability, nor for liability prior to acceptance of the works. This might still be provided for in the bill on the obligatory insurance of the ten-year liability of architects and of "other intellectual professions in the construction sector" that was announced earlier.

For more information on this topic, you can consult Pim van den Bos (the author) and Siegfried Busscher (the author and head of the Private Construction Law practice group).