The issue of distances is one of the challenges in projects that include demolition and construction works in a dense urban environment, with an emphasis on those that include excavations for the construction of basement floors. This factor determines the insurance company’s approach to the level of risk.

When analyzing the risks for contract works insurance, it is customary to refer to three main distances:


Risks in demolition works – Refer to the construction distances of the existing building (which is intended for demolition) in relation to the boundaries of the Lot, and the scenario of a partial collapse or parts of walls that will “fly” outside the Lot and damage a neighboring building or, heaven forbid, injure passersby. The closer the building is to the boundaries of the Lot, and/or taller it is, the higher the risk.


Third-party risks – Refer to the construction distances of the new building under construction in relation to the boundaries of the Lot, above ground level, and to the scenario of construction materials falling into neighboring yards and sidewalks, during construction or hoisting, or to construction failures adjacent to neighboring buildings. In most cases, the danger distance required for the safety of passersby is five meters; less than that, the level of risk increases and appropriate protections will be required such as safe crossings for pedestrians, netting to protect against falling objects, etc.


Vibration, Weakening and Removal of Support (extension to third-party risk, in case of damage to the stability of neighboring buildings) – Refer to the distances of neighboring buildings in relation to the limits of the excavation, i.e. below ground level. In the world of engineering insurance, it is customary today to define a distance of 3-6 meters as a high risk, and less than that as an exceptional risk, regardless of the excavation depth or the method of ground support.


It should be emphasized that each case can and should be examined on its own merits. Even according to the strict view of the reinsurers from abroad, as long as a 1:1 ratio is maintained between the distance and the depth, then the risk can still be regarded as reasonable (for example, a neighboring building is “only” four meters away, but they dig to a depth of only three meters, so it is possible to classify the risk as usual, despite the aforementioned).


In any case, where there is a high risk to the neighboring buildings, it is advisable to perform preliminary documentation of the surroundings to prevent false complaints from neighbors who “develop” cracks, and also to give the insurance company a wider angle on the Project’s environment.


In a building documentation survey, we will conduct an external documentation of buildings that border the first line of the construction site, and sometimes also in the second circle, in order to document the state of existing failures, such as cracks in the shell, local subsidence, and more. The documentation is carried out in public areas and on the outer shell of the building, without entering the residential units and infringing the privacy of the residents.


Main highlights in the Neighboring Buildings’ Documentation Survey:


It is recommended to periodically monitor the development of cracks or subsidence in nearby buildings by a Foreman or Engineer.


It should be emphasized that diagonal/graded cracks or through cracks are a sign of a possible failure in the skeletal system/foundations, but do not necessarily pose a danger to the stability of the structure and must be examined by a Structural Engineer. Straight cracks (vertical and horizontal) are mainly an aesthetic defect but are not dangerous to the stability of the structure. They appear mainly between the connection between concrete beams/columns and blocks, near windows, etc., and result from a different thermal behavior between the block layers and the concrete or between the layers of the blocks themselves.


The documentation of the buildings is performed visually, without the use of dedicated equipment or special means, and without examination of the foundation and skeletal systems. This assessment for the insurance does not constitute a Structural Engineering Evaluation of the condition of the buildings, particularly regarding the foundation and structural integrity. Naturally, there may be defects or failures that are not visible to the eye.


It should be taken into account that in the vicinity of the Site, other construction works and/or infrastructure projects may be carried out at the same time, which may cause damage to buildings or third parties bordering the work site, or exacerbate existing failures.

A classic condition in a contract works policy is to place a security guard on the site, is this the only choice? No!

But…there are conditions that must be met in order for the insurance company to agree to deviate from the policy. See a creative example from a site that is divided into several sub-areas, where the permanent guard was actually replaced by three parallel security circles:


A mechanical breakdown insurance policy is designed to insure electro-mechanical equipment in case of unexpected accidental damage, and is also used as a basis for a loss of profits policy as a result of a mechanical breakdown event. On the one hand, they insure typical systems such as pumps, compressors, air-conditioning systems and refrigeration systems, generators and transformers, and elevators and escalators; and on the other hand, industrial systems such as printing presses, production lines in factories, processing machines (CNC), turbines and water desalination facilities, etc.


In the contract works insurance policy there is an exception for work stoppage, usually for a period exceeding 90 days. It is important to understand that the coverage is not stopped, but its scope may be affected.