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The recent George building that collapsed was the worst possible example of the type of claim an insurer may face.
Contractors All Risk Insurance
According to a study issued by Swiss Re, the first contractors all risk insurance got issued in 1929, but it became popular in the period after WW2.
Very technical insurance because of the variety of risks. Just think how the world has advanced in the last 100 years and how many new building and engineering methods were introduced and experimented with, roads, bridges, buildings and machines, and airports, to name a few. This insurance policy plays a big part in the construction industry. Just imagine yourself on a construction site, the different types of contractors, and everything going on there. Contractors, all risks can cover all that. Contractors all risk insurance, or as we in the industry refer to it, car insurance is extensive and is always amazed at the damage claims that get paid.
Insurance is the backbone of progress and the development of everything new.
My article is aimed not just at the contractor but also at the client. Pay for a contract upfront and force the contractor who steps on your premises to be insured. Drafting a contract, in the beginning, is way less than a civil suit when something goes wrong. List of contractors you may be dealing with daily.
electrician
plumber
IT Specialist
builder doing alteration
solar expert installing your new system
security experts
painter
Most work in and around the house starts with a handshake or verbal agreement, and most contractors do not have the contractor's liability insurance.
What are (CAR insurance) Contractors All Risk Insurance or contractors all risk insurance policy?
Property damage and third-party injury or damage risks are two primary types of risks in construction projects. The insurance industry combined them into a unique product.
Who needs "CAR" insurance?
If you are contracting to carry out any work on behalf of a client, then it is likely that you will need some form of contractor all-risk insurance in place. Our experienced contractors only become aware of the availability of this cover when they tender on a job, and the client or finance company insist on it.
You need to be covered if you go to any construction site to do work.
The principal (employer)
The owner of the building
The Contractor
The main contractor.
Sub-Contractors
The various contractors that are going to do the work.
Financing Company
Construction insurance is critical for them
All parties on a project need to be covered.
Insurers or underwriters lose the right to subrogation, meaning that if it pays out funds to one party in the contract, they cannot seek to recover those funds from another party in the agreement.
For example, a significant investment company want to build an office block for a specific tenant. They prepare tender documents and accept a tender who will be the main contractor. The document explicitly states what the insurance must look like and who will be responsible for taking it out and paying the premium. The insurance structure the policy according to these needs.
Why do contractors need contractor all-risk policies?
To protect themselves from financial losses that could occur as a result of something going wrong during the course of a project.
Protect themselves against loss or damage and legal action because of death or injury to a person.
The biggest reason all contractors should look at this insurance is the exclusion of the Public Liability policy from a standard business policy.
What does a contractor's all-risk policy cover?
1) Property damage - This includes any physical damage to contracts undertaken.
2) Third-party injury or damage (liability insurance)
3) legal liability
1. Contractors All Risk Once Off
For a specific contract, for example, a tender to build a new airport or office building, a bridge or civil work. (Specific Project)
2) Annual contract all risk insurance
We do annual contract policies for businesses who do maintenance work or contractors who go from one to the other or maybe busy with more than one contract at any stage. The insurance looks the same as the single contract cover material damage and liability insurance.
What are the possible extensions?
The Advanced Consequential Loss / Project Delay Insurance
protection of a potential consequential financial loss that could cripple the start-up of a new business, factory, shopping mall and the like. Insurers are strict with granting this cover and are only available on a once-off contract.
Just imagine a big shopping mall that can't open because of a claim or incident.
Removal of Lateral Support Liability
Significant risk for both the physical damage and the liability part of the policy, the demand for this cover is increasing, and expect strict underwriting measures by insurers and underwriters.
Usually only provided for a project-specific contract basis, they may consider adding it to an annual policy.
Just imagine the support used to hold up the next floor of a multi-level building. Removing the support at the wrong time can create a disaster.
Spread of Fire
Suppose you can imagine a contractor getting a contract to build a lodge in a national park. If a fire starts on the contract site and spreads to adjacent farms or park property, it may destroy land and buildings and kill animals or people. Underwriters look at this risk with great caution because of complex claims in the recent past.
How can we summarise the cover provided by the contractors all risks "car" policy?
The Contractors All Risk Insurance Policy covers the following risks:
The Contract works
fire,
flood,
wind,
earthquakes,
water damage,
mould,
construction faults and negligence; typically do not cover normal wear and tear, willful neglect or poor workmanship.
spread of fire
theft
flooding
earthquakes
landslides
surrounding property
debris removal
public liability
transit and storage
theft of cables
piping & wiring
Malicious damage
If stated in the document to be included, some are covered automatically. Others you need to apply.
List of possible extensions or special considerations to the primary cover.
Additional custom duty
Air freight
Damage to surrounding property
Debris removal
Earthquake
Escalation
Loss due to breakage of glass
Maintenance visits
a provision for escalation
acts of terrorism
excess third-party liability
the interests of manufacturers, suppliers, contractors, and subcontractors.
Annual policies allow the addition of Plant All Risk Cover.
Damage to surrounding property
Cost of removal of debris after an incident
Loss or damage during inland transit
Loss of or damage to contract works while in temporary storage
Damage during testing and commissioning of equipment
Professional Fees
Property taken over
Road reserve and servitude
Fire Brigade / Public Authorities
Beneficial Occupation
The difference in Excess / Difference in Conditions (Principal Controlled Insurance)
Work away
List of typical exclusions on the contract works insurance.
Wooden or thatch buildings, unless declared
Excludes offshore risks
Shaft sinking
Underground mining
Tunnelling – unless expressly declared
Defective workmanship, material & design
Professional Indemnity for engineers or architects
Fault/error of professional people
Vehicles licensed for general road use
Waterborne vessels
Aircraft
Principal's advanced loss of profits – cover is available
Contractors plant - cover available
Tools and equipment - available
The plant hired in - available
Normal wear and tear
Wilful negligence or poor/defective workmanship
Fines and Penalties
Consequential Loss
Loss or damage during transit by sea or air
Loss or damage directly or indirectly arising from pollution or contamination.
War invasion or acts of terrorism causing damages
Radioactive contamination from any nuclear fuel or nuclear waste
Damage to any computer or other equipment which processes or stores data
Sanctions
Confiscation, nationalisation, expropriation and abandonment
Design of the works
Professional Indemnity
Products Liability
Riot & Strike outside RSA and Namibia
When should contractors all risk insurance be taken out?
Beginning of the contract. We get requests to insure when a contract is already on its way. The insurers will look at every risk very carefully.
How long will the insurance policy run?
The insurance policy for a single contract runs for the duration of the contract. It is a single policy and on a project-specific basis.
The annual policy is every year and gets extended every 12 months.
How much is the premium? Is it expensive?
Contractors all risks CAR insurance is not expensive compared to the finished product, but if added to a contractor's existing insurance, it can become pricy. Get a risk insurance quote and look at the premium before deciding.
Can CAR policies be issued just with liability insurance only?
Complete the questionnaire and indicate to the insurer that you want the liability insurance only. I suggest asking the insurer for a complete quote to determine the payment.
I am going to build a house. I purchased the land and built the house myself with workers from the street. Will an insurance company give me coverage?
You are the employer or principal. I have seen insurers help clients with requests like this, but it is not the business they like. Complete the form and see if you qualify.
Have you got a list of the possible contracts needing this insurance?
Every contractor, big or small, needs it because of the exclusion of general liability insurance on normal business insurance, but here is a list taken from the CIDB (Construction Industry Development Board) Website.
General Building
Civil Engineering
Electrical Engineering Works
Building
Electrical Engineering Works
Infrastructure Mechanical Engineering
Asphalt works (supply and lay)
Building excavations, shaft sinking, lateral earth support
Corrosion protection (cathodic, anodic, and electrolytic)
Demolition and blasting
Fire prevention and protection systems
Glazing, curtain walls and shop fronts
Landscaping, irrigation and horticulture works
Lifts, escalators and travellators (installation, commissioning and maintenance)
Piling and specialised foundations for buildings and structures
Road markings and signage
Structural steelwork fabrication and erection
Timber buildings and structures
Waterproofing of basements, roofs and walls using specialist systems
Water supply and drainage for buildings (wet services, plumbing)
Steel security fencing or precast concrete
Where can I get an insurance-approved contractor?
I do not have a list of contractors that have insurance, but you can see who is registered with the CIBD (List of approved contractors with the construction industries board) or Contact the NHBRC
Summary
Contractors' all risk forms part of business insurance, and the premium varies from business to business. To get coverage from a financial services provider, we need a completed form with all your details, including your contact number. They will assess your request and typically take 2 to 3 days to get a quote.
Complete the forms to the best of your ability to ensure you have coverage for the damage when you claim. We assist the insured with the documents as far as we can. They may want to visit the site and confirm your specific needs.
Take action and get your business insured properly.
Albert Schuurman
Because retiring is difficult and there is a difference between retirement and financial freedom, I have created a course on the topic. Business insurance and taking out risk cover is part of creating, protecting and preserving wealth. Where and how does business insurance fit into the plan?
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