We have been undertaking delay analyses for years, whether they be acting for the insurer or re-insurers in the assessment of a DSU delay claim or BI claim under an insurance policy or on behalf of an EPC contractor preparing an extension of time claim under a construction contract.
During this period, it has amazed us how often we come across the same problems time and time again. So, as we like to do our best to help avoid disputes, we thought we would briefly summarise what in our view are the top 5 defences to a DSU delay claim or to put it another way, the top 5 reasons why a claimant within a DSU claim usually does not recover what he claims or indeed expects!
Defence 1 – Claim does not demonstrate cause and effect
Remarkably the insured does not even bother to prepare a delay analysis, but simply compares two dates, the planned commercial operation date before the indemnified damage event has occurred and then the date once it has ceased to impact. He then asserts that the sole reason for the delay between the two dates was the damage event! Clearly this fails to demonstrate cause and effect and prove the actual delay caused by the damage event and is insufficient to substantiate his claim. Clearly a detailed delay analysis is required, and cause and effect demonstrated.
Defence 2 – Claim is not factually based
The next major issue is when the insured presents his delay analysis, but it is entirely based on theory and not factually based, say for example by using a simple planned impacted analysis. As we keep on saying, it’s all about the facts! Theoretical or hypothetical analyses do not replace what actually happened, as clearly the claimant is indemnified against the actual effects of the damage event and not what might or could have happened!
If the damage event has occurred and the reinstatement work completed, then the actual impact of it should be known and understood. This should be the basis of the DSU delay claim analysis, and not what might have happened.
Defence 3 – Claim Does not Demonstrate delays to the Critical Path
Clearly if a damage event has occurred then it needs to impact the critical path of the project, for it to delay commercial operation. This is something that is sometimes not addressed by the claimant, who merely alleges that the damage event caused a delay to commercial operation and does not evidence that it did in fact impact the critical path and not cause a mere non-critical prolongation of an activity.
Defence 4 – Claim Fails to address delays prior to the date of loss
Perhaps the most contentious issue that we find is when the claimant alleges that the project prior to occurrence of the damage event, was not in a delay. We all know construction is a complex business and most construction projects suffer delays from the onset, which then result in the contractor working harder and boxing clever to mitigate that delay. But having said this, from our experience it is highly likely that the project is in some sort of prior delay, and he sometimes can fail to report this and accordingly take account of all known delays in his delay analysis. The ascertainment of the ‘but for’ position can substantially reduce the claimants entitlement and should be addressed adequately by the claimant.
Defence 5 – Claim Fails to consider concurrent delays.
Finally, as we all know construction projects suffer numerous delays and the criticality or not of these delays needs to be assessed. Claimants all too often fail to address or even consider concurrent delays, which when addressed again substantially affects the claimants entitlements. It is better for a claimant to consider, evaluate and dismiss concurrent delays rather than deny their existence!
Based on the above, proving a DSU or BI claim is a complex business, with quite a few high hurdles to get over. But it seems to us that claimants continually fail to get the basics right when submitting their claim, and this results in unrealistic expectations being set and the time taken to reach an amicable negotiated settlement being protracted, or in some cases a negotiated settlement not being achieved.
Insurers or adjusters, if you are looking to ensure that the claimants entitlements are adequately demonstrated, then the above is a good place to start! Claimants, take our advice, deal with the above issues and the whole claim handling process may run a lot smoother!
Please feel free to contact us for more information.