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 Contractors All Risk Insurance 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 disasters, fire, theft, transit, construction collapse, defective design, defective workmanship or materials, malicious damage to property and third party liability exposures.
Contractors All Risks 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.
The basic principle is that Contractors All Risks Insurance (“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.
Most commonly, Contractors All Risk 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. Annual Contractors All Risk cover is quite beneficial. Advantages of Contractors All Risk Insurance include a fixed rate for 12 months, all projects are covered- no matter the size and of course if you have an annual policy you will never forget to insure a construction site.
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.
As we are niche insurance advisors to the construction industry we have an understanding of your risks and are able to advise you accordingly. Let us help you with the insurance side of planning and organizing your construction projects.
To read our blog on The Meaning of Having Your Name On a CAR Policy, click here.
by Daniel Gussenhoven & Pam Claasen
