The excavator bucket snags, the operator smells gas, or the whole neighbourhood loses its internet connection at once: cutting an underground line is one of the most common loss events in civil engineering, and the bill arrives soon. According to a joint 2022 information notice from OPUS TIGÁZ and OPUS TITÁSZ, the gas distributor recorded some 630 cases of pipeline damage in 2021, more than a hundred of them linked to outdoor work, while the electricity distributor recorded nearly 1,700 cases of damage in the same year, causing outages that affected hundreds or thousands of households. In practice, the utility companies claim the cost of repairing the fault from whoever caused the damage, and their notice specifically stresses that knowing the route of the lines is essential before any earthworks. As a broker, I see contractors being uncertain about three questions: who is liable if the client did not provide a utility map; whether the liability section of the CAR (contractors' all risks) policy pays the utility company's bill; and what happens if utility coordination in the e-közmű system (Hungary's electronic public utility register) was skipped. In this article I go through these three questions.
- Utility companies claim the cost of repairing the fault from the contractor that caused the damage – in 2021 OPUS TIGÁZ recorded some 630 cases of pipeline damage, more than a hundred of them linked to outdoor work, and in the same year OPUS TITÁSZ recorded nearly 1,700 cases of damage.
- Hungarian CAR (contractors' all risks) policy conditions typically apply a separate clause to underground cables and pipes: payment is conditional on the contractor having obtained information from the operators about the position of the lines before the work, a higher deductible applies to damage to a correctly marked line, and consequential loss is excluded – this varies by insurer.
- Skipped utility coordination therefore does not primarily open a dispute about gross negligence but breaches the clause's condition of cover; the contractor's liability towards the utility company remains regardless.
Who is liable: the contractor, the client or the designer?
The starting point is Section 6:519 of the Hungarian Civil Code (Ptk.): anyone who unlawfully causes damage to another must compensate for it, and is released from liability only by proving that they acted as can generally be expected in the given situation. In case law, operating earthmoving machinery may qualify as an extra-hazardous activity, where exoneration is even harder. The utility company therefore proceeds against the contractor, and the professional standard expected of the contractor is high: under Act LXXXVI of 2007 on Electricity and Act XL of 2008 on Natural Gas Supply, and their implementing decrees on safety zones, work within the safety zone of the lines may only be carried out with the operator's consent and under its conditions, while Government Decree 324/2013 (VIII. 29.) on the unified electronic public utility register makes the utility coordination conducted in the e-közmű system, and the utility statement issued there and valid for one year, part of the design process. Under the decree, utility coordination is requested by the registered designer, and the statement sets out the technical conditions for safely approaching sections of the network – but this does not release the contractor: the utility companies' notices call for the route to be identified on site before construction starts, for hand excavation near the line and, where necessary, for specialist supervision. If the client did not hand over utility data, this may come into play in the settlement between the contractor and the client under their construction contract – as contributory conduct or apportionment of the damage – but it typically does not end the contractor's liability towards the utility company. The general risks of civil engineering projects are covered in the article on civil engineering and utilities; here the focus is on the questions that arise after the damage.
What does the CAR liability section pay – and what does the utility clause say?
A utility line belonging to someone else is third-party property, so damage to it falls under the liability section (Section II) of the CAR policy, not under the material damage section. However, Hungarian policy conditions typically apply a separate clause to underground cables, pipes and other facilities, modelled on the international standard and containing three elements. First, the insurer pays only if, before starting the work, the contractor obtained information from the competent operators about the exact position of the lines and took the precautions necessary to avoid damaging them. Second, damage to a line correctly shown in the plans is subject to a higher deductible – often set as a percentage of the loss amount – while for a line shown incorrectly the basic deductible applies. Third, payment is limited to the cost of repairing the line; consequential losses and fines are excluded. The exact wording, the amount of the deductible and the sub-limit vary by insurer, so you need to check the list of clauses in your own policy. In practice, this means that the materials and labour items of the utility company's repair bill may fall within the cover, subject to the clause's conditions and after deduction of the deductible – the other items on the bill, however, are a separate question.
Skipped utility coordination: gross negligence or a condition of cover?
Many contractors think the dispute is about whether the missing coordination amounts to gross negligence. Under the indemnity insurance rules of the Ptk., the insurer is exempted (released from paying) if it proves that the damage was caused intentionally or through gross negligence by the insured or by a group of persons specified in the policy conditions – the burden of proof is on the insurer, and this is an exemption, not an exclusion. With the utility clause, however, the question is typically decided earlier: obtaining the information is a condition of payment, and if the contractor did not do so, the insurer does not pay for the damage to the line under this clause, regardless of whether the omission would qualify as gross negligence. In the liability section, gross negligence works according to a different logic anyway: under the policy conditions, the insurer in many cases pays the injured party and can reclaim the amount paid from the insured (right of recourse) – the details vary from one set of conditions to another. One thing does not change: the contractor's liability towards the utility company does not depend on whether there is cover, so the bill has to be paid even if the insurer does not pay. The exclusions map goes through the other typical CAR exclusions as well.
The utility company's lost revenue and the subscribers' losses
The utility company's bill often has three layers: the materials and labour for the repair, the call-out and the restart of the network; the revenue lost because of the interrupted service, or the gas lost; and the compensation paid to subscribers. Under Section 6:522 of the Ptk., damages also include loss of profit, so the utility company can claim this from the contractor if it proves it. On the insurance side, however, the picture is different: the utility clause typically excludes consequential loss, and liability policies typically also exclude pure financial loss not connected to property damage – for example, the lost business of companies left without internet – or include it only by a separate clause. Whether the utility company's own lost revenue is covered as a consequence of property damage depends on reading the clause and the general conditions together, and varies by insurer; contractual penalties accepted by the insured, or flat-rate compensation paid to subscribers, are typically excluded. It is therefore worth breaking the bill down item by item and reporting it to the insurer in that form.
What should the contractor do before the work and after the damage?
Before the work: have the e-közmű coordination and the utility statement in hand, ask the client in writing for the utility data, identify the route on site, use hand excavation near the line, request specialist supervision, and document all of this with photos and in the construction log – the article on documenting damage describes the method. In your policy, check the deductible and sub-limit of the utility clause and the exact wording of the information condition. After the damage: notify the utility company's fault reporting service without delay and, in the case of a gas pipe, evacuate the area; report the claim on the insurer's claims line; do not acknowledge or settle the utility company's claim without the insurer's consent, because under the policy conditions such an acknowledgement is typically not binding on the insurer; ask for an itemised bill, and separate the repair part from the lost-revenue and compensation items. The primary route for reporting a claim is the insurer's claims line; if the case gets stuck or becomes disputed over the utility company's bill or the interpretation of the clause, I help where I can on the company's behalf. I cannot promise anything: the insurer pays only for what is an insured event under your contract, subject to the conditions and the deductible of the utility clause.
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Sources
- OPUS TIGÁZ Zrt. and OPUS TITÁSZ Zrt. information notice on outages linked to outdoor work and their prevention (haromhatar.hu, 21 April 2022) – case numbers, steps to take before earthworks
- Government Decree 324/2013 (VIII. 29.) on the unified electronic public utility register – utility coordination, utility statement (Sections 9/A–9/C), data provision by operators (Section 6)
- Hungarian Civil Code (Ptk.) – Act V of 2013, Section 6:519 (liability for causing damage), Section 6:522 (concept of damage, loss of profit), insurer's exemption in indemnity insurance and liability insurance rules
- Electricity Act (Vet.) – Act LXXXVI of 2007 on Electricity (safety zone)
- Gas Supply Act (Get.) – Act XL of 2008 on Natural Gas Supply (safety zone)
