Regulations on insurance in construction investment activities in Vietnam

Regulations on insurance in construction investment activities in Vietnam (Internet image)

1. Insurance in construction investment activities in Vietnam

According to Article 9 of the Law on Construction 2014 amended in 2020, the insurance in construction investment activities in Vietnam is as follows:

- Insurance in construction investment activities covers:

+ Work insurance during the construction;

+ Construction investment consultancy professional liability insurance;

+ Insurance for construction supplies, materials, means, equipment and laborers;

+ Civil liability insurance for third party;

+ Construction work warranty insurance.

- Responsibility to buy compulsory insurance in construction investment activities is prescribed as follows:

+ Project owners shall buy work insurance during the construction for works affecting the community safety, environment, works with particular technical requirements and complicated construction conditions;

+ Consultancy contractors shall buy construction investment consultancy professional liability insurance for construction survey and construction design of construction works of grade II or higher grade;

+ Construction contractors shall buy insurance for construction workers working on the construction sites and civil liability insurance for third party.

- Project owners, consultancy contractors and construction contractors are encouraged to buy types of insurance in construction investment activities, except for the case specified in Clause 2 of Article 9 of the Law on Construction 2014 amended in 2020.

2. Entities required to buy compulsory insurance for construction investment activities in Vietnam

According to Article 4 of Decree 119/2015/ND-CP amended in Decree 20/2022/ND-CP, entities required to buy compulsory insurance for construction investment activities are as follows:

- Except for construction works related to national defence, security and state secret, project owners or contractors that fall within the case in which construction insurance premiums have been included in the contractual price must buy construction insurance which is valid during the construction period with respect to the following construction works:

+  Construction projects or project items which have great impacts on public safety and benefits as stipulated by Appendix X of Decree 15/2021/ND-CP;

+ Construction projects having significant environmental impacts that belong to the list of projects subject to environmental impact assessment under the provisions of the Appendix II and III of Decree 18/2015/ND-CP;

+ Construction projects which have particular technical specifications and are subject to complicated construction requirements in accordance with laws on construction and other relevant legislation.

- Consultancy service contractors must buy professional liability insurance for provision of construction consultancy service with respect to the work of construction surveying and design for construction projects ranked II or higher.

- Engineering construction contractors must buy compulsory insurance for employees working at construction sites and compulsory third-party civil liability insurance.

3. Insurance validity period in Vietnam

Pursuant to Article 5 of Decree 119/2015/ND-CP amended in Decree 20/2022/ND-CP stipulating the insurance period as follows:

- The validity period of construction insurance during the construction progress means the specific time period from the opening date to the closing date of construction activities with reference to the investment decision (even including any modification or amendment if possible) issued by a competent authority and agreed upon in an insurance contract

- Professional liability insurance for construction consultancy service shall be valid from the date on which agreed construction consultancy service is rendered to the date on which the warranty term of construction works ends in accordance with laws.

- Insurance for employees working at construction sites shall be valid from the date on which they start performing their work to the date on which the warranty term of construction works ends in accordance with laws. The determination of specific validity period of insurance for employees working at construction sites shall be consistent with their employment contracts.

- Compulsory third-party civil liability insurance shall be a specific period, from the start date to the end date of the construction time according to the construction contract and included in the insurance policy

4. Scope of insurance coverage and denial of coverage in Vietnam

According to Article 6 of Decree 119/2015/ND-CP amended in Decree 20/2022/ND-CP stipulating the coverage, exclusion of insurance liability as follows:

- Scope of insurance coverage

+ With respect to insurance for works in progress: An insurance enterprise shall perform its duty to provide insurance cover against losses, claims or damages that may arise from all risks, except for losses referred to in paragraph 2 of Article 6 of Decree 119/2015/ND-CP.

+ With respect to professional liability insurance for construction investment consultancy: An insurance enterprise shall pay a construction consultancy contractor sums as an insurance cover which such contractor has its duty to provide a damage against losses or claims for a third party and pay related statutory costs incurred from provision of a construction consultancy service, except for losses or damages stipulated in paragraph 2 of Article 6 of Decree 119/2015/ND-CP;

+ With respect to insurance for employees working at construction sites: An insurance enterprise shall be liable to pay a construction contractor sums as an insurance cover which such contractor has its duty to provide damages for these employees who suffer injury or death caused by work accidents or occupational diseases that fall within the scope of insurance coverage.

+ With respect to compulsory third-party civil liability insurance: An insurance enterprise shall be liable to pay a construction contractor sums as an insurance cover which such contractor has its duty to provide compensation for the third party regarding damage outside of the insurance policy in terms of health, life, assets generated during construction and related legal costs (if any) that fall within the scope of insurance coverage in the insurance policy

- Denial of coverage

Insurance enterprises shall not have duties to pay insurance cover against the following losses or damages

+ Those that arise from intentional acts;

+ Those which are not incidental ones;

+ Those which are not quantified by monetary amounts;

+ Catastrophic losses or damages;

+ Those that arise from the case in which insurance buyers have no insurable interests.

+ Damage or losses in accordance with international practices agreed to apply by parties that participate in the insurance if such practices are not contrary to the law of Vietnam

Ngoc Nhi

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