CONTRACTORS ALL RISK
ABOUT CONTRACTORS ALL RISK
Contractors All Risk insurance “CAR” (also referred to as Contract Works insurance or Construction Insurance ) typically provides an all risks cover during the construction period for the cost of physical loss or damage to building and civil works, advanced loss of profits/ revenue/income, public liability, installation and constructional plant/machinery including hired-in plant and tools where you are responsible under Contractors Plant Hire Association (“CPHA”) conditions or a standard conditions of Hire Contract.
Most commonly, CAR insurance is underwritten on an annual policy covering all projects as well as plant and machinery, but is also available to cover single projects for more specific extensions as well. If you require Lateral Support Liability Insurance CLICK HERE
For more information on Contractors All Risk, click here.
The basic principle is that Contractors’ All Risks (“CAR”) insurance covers those losses not covered by an ‘excluded peril’. The benefit to the Contractor also known as the “insured” under this type of policy is that the burden is shifted to the insurer who, to repudiate or reject the claim, is required to show that the cause of the loss falls within an exclusion.(something not covered)
CAR contracts exclude cover for risks such as defects due to wear and tear, obsolescence (outmodedness or oldness), deterioration, rust and mildew, loss and damage arising out of war, nuclear, political, computers and for faulty workmanship and faulty design.
Cover for faulty workmanship, faulty design, errors and omissions are more specifically insured under Design and Construct Professional Indemnity policies.
Contractors’ All Risks insurance is usually taken out in the joint names of the contractor and the employer. Other interested parties, such as funders, often ask to be added as a joint name or request their insurable interest to be noted on the policy. The theory is that if damage occurs to the insured property then, regardless of fault, insurance funds will be available to allow for restoration and reinstatement.
Comprehensive All Risks cover intended for the erection of anything between private houses, cluster homes, small blocks of flats up to large projects such as shopping centers, sugar mills, power stations, refineries as well as infrastructure such as bridges, roads, dams water reticulation and pipelines. This cover will also extend to projects such as installation of air conditioners and painting contractors. The policy covers the construction site against Storm, Fire, Water, Subsidence, Collapse, Landslip, Earthquake, Cyclone, Theft, Transit, Malicious Damage, Fire, Damage To Underground Services, Third Party Damages subject to the standard terms and conditions as outlined in the policy wording. Please fill in our online enquiry form and one of our representatives will contact you shortly. The application form can also be downloaded in Word Format, completed and sent to email@example.com or faxed to 086 508 3625. CONTRACTORS ALL RISK ANNUAL DOCUMENT DOWNLOAD
ONCE-OFF VS ANNUAL
This contractors Insurance policy is taken on a once-off basis. When you are awarded a tender, we will provide a quote on that specific project based on its value and risks. This cover will end when the project is complete.
This policy is slightly more comprehensive than the Once-off policy. You will be quoted on your Annual Projection and Maximum Contract Value. The Contractor’s All Risk Policy will cover all your projects undertaken in the year of the policy inception. The premium is generally lower than the Once-off policy.
THIRD PARTY GENERAL LIABILITY
This policy provides cover to the contactor for their legal liability for damage to the property of others or for the bodily injury to a member of the public whilst carrying out the activities of the business described in the schedule of insurance arising out of their works, excluding personal injury where covered by Workman’s compensation (”COID”)
The Third Party General Liability policy does not, however, provide cover for damage to the works itself. The policy may provide cover for works that have been handed over but this would depend on the insurance arrangements made for the handed over property.
Third Party General Liability cover can be arranged on an annual basis or project specific for the full construction period plus any Defects Liability or Maintenance Period required in the contract.
The policy can be extended to provide indemnity to the principal for liability arising out of the contractors’ negligence (PI Cover). It can also be extended to cover sub-contractors if required.
If required, both own plant and hired-in-plant can be insured as part of the contract works subject to a separate sum insured being supplied for each section of cover.
Own plant can include cement mixers, excavators, generators, scaffolding, access towers, plant storage containers, etc. Plant can be expensive, so many construction companies hire in certain items of plant, and especially where this is only used occasionally for certain contracts. Typical items hired in by a contractor could include dumpers, excavators, mobile cranes, tower cranes, etc.
FREQUENTLY ASKED QUESTIONS
Why is it necessary?
When it comes to the planning and organizing of a new construction project, insurance doesn’t always get the priority it requires. Very often it is left to the last minute or even after the work has commenced. Should you apply for a Contracts Work Policy after you have begun civil works or construction, this is known as a take on and must be declared.
All construction work no matter the size or complexity of the project contains an element of risk. This will vary from project to project but risks common to all construction works include:
- Natural Disaster – earthquake, flooding, storm
- Construction collapse
- Defective design, workmanship or materials
- Malicious damage to property
- Third party liability exposures
These exposures will result in additional costs to repair or replace the damage to the Works. In order to protect the project from these risks during the construction period a Contract Works and general liability policy will be required.
What does “Contract Works” mean?
The contract works includes both the permanent works including unfixed and unfastened (moveable) materials and the temporary works on site, anywhere in the Territorial limits, including transit by road and rail, while in the duration of construction until handed over by the contractor to the principal or employer on practical completion. The permanent works are the main subject matter of the contract, for example the house, shop, factory, etc. that is being built. Permanent works will also include all unfixed materials, such as copper pipes or wooden window frames delivered on site for incorporation into the contract works either on the contract site or on the premises of suppliers and sub-contractors. The temporary works are site installations which are not part of the project, but are required to facilitate its building. Examples include access roads, scaffolding, etc. these need to be more specifically insured.
What does “Property Insured” mean?
The Contract Works (including free issue materials the Value of which has been included, if applicable) to be undertaken in terms of the Insured Contract including all Temporary Works erected or in the course of erection and all materials and other items for incorporation therein.
“Temporary Works” shall mean all constructional aids, equipment, structures or works (not being part of the permanent works) the value of which has been included in the Contract Value used or intended for use on the Insured Contracts and which:
- do not comprise construction plant, tools and equipment;
- are not intended to be removed from the Contract Site on completion of the Contract (Scaffolding shuttering and formwork as well as construction equipment specially designed and/or constructed or acquired for an Insured Contract and which is intended for re-use on another Contract must be more specifically insured); or
- has no residual value at the completion of the Contract (other than scrap value) solely due to their specialised nature.
What is “Existing Property”?
Where a project includes working on an existing property either through maintenance, repair, renovation or an extension, the contract conditions will normally stipulate that the Contract Works insurance is to be arranged by either the Principal or the builder/project manager. It is generally considered that the Principal is best placed to take out the insurances necessary to adequately deal with the risks associated with projects involving existing property. Should the Principal or employer require cover for the Existing Property, then the Contractor must obtain the Surrounding Property extension.
Maintenance Period / Defects Liability Period
This insurance policy shall be extended for the maintenance period stated in the Schedule to cover loss of or damage to the contract works – caused by the insured contractor(s) in the course of the operations carried out for the purpose of complying with the obligations under the maintenance provisions of the contract, – occurring during the maintenance period provided such loss or damage was caused on the site during the construction period before the certificate of completion for the lost or damaged section was issue.
What does the 'All Risks' refer to?
The ‘All Risks’ component refers to the cover under the contract works section of the policy. The insurance terminology in this instance means that the policy will cover any loss or damage to the property and/or materials other than certain specific exclusions. Some of the specifically excluded covers generally include the existing structure, damage to external structures not part of the contract, fines and penalties, errors or omissions in design, and defective property and workmanship.
What is the Coverage on a Contractors All Risk Policy? (The COVER)
A Contract Works policy provides cover for sudden and accidental physical loss or damage that occurs to the property insured during the construction period. It is important to note that cover will cease:
- On any part of the Works taken over or taken into use by the Principal – Beneficial occupation
- Once a Practical Completion Certificate is issued, however in most instances when Beneficial Occupation has occurred
- On the expiry date shown in the Policy
The cover does continue through the defects liability period – also known as the Maintenance Period in the insurance policy – for loss or damage discovered during this period the cause of which arises out of the Contract Works or for physical loss or damage arising whilst executing work under the requirements of Defects Liability clause of the contract.
What is Insured?
The Contract Works should cover the full replacement value i.e. the cost of rebuilding the whole project. Principal supplied materials (Free Issue Material) should be insured too and some policy require that the professional costs (including legal fees) be a part of this declared value. Very often the Principal will supply their own goods or materials e.g. the floor tiles in a house construction. These can be included in the insurance so long as their value has been declared in the sums insured.
(Definition of Free Issue Material: Material supplied by the purchaser for incorporation into the contract works without charge to the Contractor)
Are sub-contractors covered?
This depends on the requirements of the contract. Not all contracts will require the Main Contractor to name the sub-contractors as an Insured in their Contract Works policy. Some sub-contract agreements require the sub-contractor to take out their own Contract Works insurance and to name the Main Contractor and Principal as an Insured.
The Contract Works policy should follow the requirements of the contract so it is essential to understand the contracts requirements and that the contract and insurance policy mirror each other in this respect.
What is not covered?
It is important to be aware of what is not covered by the Policy. Not all eventualities are covered, here are a few to mention:
- Construction plant, equipment and tools
- Consequential loss – loss due to delay, loss of any kind or description whatsoever including penalties, lack of performance, loss of contract, liquidated damages;
- Losses discovered when an inventory is taken
- Existing property – unless it has been specifically agreed to be included in the cover
- Faulty design, workmanship or materials
- Errors and Omissions
- Cessation of work whether total or partial
- Willful act or willful negligence of the Insured or of his representatives
- Political acts ( these are insured under SASRIA)
- The excess or the deductible stated in the schedule
A Contract Works policy also provides additional allowances (if selected):
- Transit – provides cover for materials to be incorporated into the Works during transit to and from the contract site.
- Materials in Storage – provides cover for materials to be incorporated into the Works when they are stored off site.
- Express delivery, Expediting Expenses or Extensions of cover– allows for overtime, express delivery etc. to speed up the repair time to get the project back on track.
- Increased Costs During Reconstruction – allows for the inflationary costs of labour and materials. This is normally expressed as a escalation percentage.
- Temporary Buildings – provides cover for site offices, huts, portaloos.
- Claims preparation costs
- Escalations , Currency and exchange fluctuations
Properties Undergoing Renovation, maintenance, repair then what are “The Surrounding Property Extension”?
For properties undergoing renovation such as houses, malls, offices etc, only the alterations are covered under the contract works, not the existing structure. Therefore, the existing structure should still continue to be insured under the existing buildings insurance policy and the contract works would normally cover the newly renovated/extended portion of the building. A common misconception by homeowners, architects, engineers and project managers is that the existing property insurer will automatically provide cover whilst an extension is being built, but this is not necessarily the case and should always be referred to the existing property insurer. If the existing buildings insurer is unable to cover the existing structure, then The Surrounding Property Extension should be added.
What is lateral support?
Any bracing, temporary or permanent design, that provides greater support in resisting side-to-side (lateral) forces and deflections. Floor and roof members typically provide lateral support for walls, columns, and beams .Vertical pilasters or secondary walls may also provide support. GET A QUOTE
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