What Is Contractors All Risks Insurance?
A Contractors All Risks insurance policy consists of 3 main sections of cover:
- Contract Works
- Public Liability Insurance
- Employers’ Liability Insurance
The contract works section provides cover for the materials and property being worked on, the public liability covers your legal liability for third party property damage and bodily injury, and employers’ liability insurance provides cover for bodily injury of employees.
Contractors All Risks Insurance cover can be provided for contractors wishing to insure for new build (speculative building) work, extension/renovation work or general jobbing work only.
Contractors All Risks Insurance - Properties Undergoing Renovation/Extension
For properties undergoing renovation such as houses, etc., only the alterations are covered under the contract works, not the existing structure. Therefore, the existing structure should 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 is that their 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, some specialist insurers should be able to offer cover and you should speak to an insurance broker for assistance with this.
What does the 'All Risks' refer to?
The 'All Risks' element refers to the cover under the contract works section of the policy. In insurance terminology this means that the policy will cover any loss or damage to the property and/or materials other than certain specific exclusions. These specifically excluded covers generally include the existing structure, errors or omissions in design, penalties, damage to external structures not part of the contract, and defective property.
The contract works includes both the permanent works including unfixed materials and the temporary works on site anywhere in the UK including transit by road, rail and inland waterway, while in the course 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 Upvc windows 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 site huts, access roads, scaffolding, etc.
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, especially where this is only used occasionally for certain contracts. Typical items hired in by a contractor could include dumpers, tracked excavators, mobile cranes, tower cranes, etc.
In order to calculate the insurance cost for hired-in-plant, the contractor would advise the total maximum value of the plant and the insurers would charge a premium based on estimated annual hire charges paid out by the contractor.
Public Liability Insurance
Public liability insurance provides cover for your legal liability in the event of damage to third party property or bodily injury to a member of the public whilst carrying out your activities. The standard limits of indemnity provided by most insurers is £1,000,000, £2,000,000 and £5,000,000, however higher limits are available with most insurers either as an extension to the existing policy or as a separate excess layer public liability policy.
Employers' Liability Insurance
Employers' liability insurance is compulsory if you employ direct employees or labour only sub-contractors as part of your work and this provides cover in the event of bodily injury to your employees or labour only sub-contractors whilst carrying out work on your behalf. Most insurers provide £10,000,000 limit of indemnity under this section of cover.
A labour only sub-contractor is generally defined as one who only provides labour for his part of the job and not any materials.
A bona fide sub-contractor is one who provides both labour and materials for his part of the job and would also normally carry his own public and employers' liability insurance. Although they do not need to be included under the employers liability section, the annual payments that the principal contractor makes to bona fide sub-contractors does still need to be advised to your insurers. It is usually a condition of the policy that the bona fide sub-contractors insurance is checked regularly and that it provides an indemnity to the principal in the event of a claim.