Looking for a contractors all risks insurance definition, as experts in the arrangement of insurance for construction and related risks we provide you with the information you require regarding the cover under a contractors all risks insurance policy.
The essence of the Contractors All Risks cover is protection against the physical loss or damage to the works being undertaken.
The policy will pay for repair or replacement of the insured works following damage caused by an insured event.
What is the cover under a contractors all risks policy?
Cover is given on an All Risks basis, which means an insured event is any loss or damage to the insured works unless caused by an exclusion contained in the policy. This is the widest form of cover the insurance industry gives.
The Contractors All Risks cover required is dependent upon the scope, value, location and duration of the works
The insured works are the permanent and temporary works disclosed to the insurer. This disclosure may be by way of the general business description for an annual policy, or a more specific disclosure for a project specific policy.
Temporary site buildings may be covered as standard by inclusion in the general definition of the contract works in the policy, if not, these will need to be specifically included with the appropriate sum insured if cover is required.
The amount insured for the works should be the highest likely contract value being undertaken during the policy period for an annual policy or the contract value for a contract specific policy. The amount insured needs to take into account and include any free issue materials, professional fees, debris removal and increased costs required to comply with any requirements imposed by public authorities.
The cover provided includes the works materials whilst in transit, but excluding air or sea transits. If cover for air or sea transits is required, the Contractors All Risks policy will need to be extended or a Marine insurance acquired.
Offsite storage is usually covered as standard subject to a specified limit, so it is important to check the limit to ensure its adequacy. It may be possible to increase the offsite storage limit on request, but location details such as construction and security may be required for high limits.
The contracts insured are limited to those within the territorial limits contained in the policy. The territorial limits need to checked to ensure they are suitable, and will almost certainly need to be amended if cover for overseas contracts is required.
The policy will apply until the soonest of issue of Certificate of Practical Completion, handover, the works being taken into use, exhaustion of the maximum contract period or expiry of the policy. The principal needs to be made aware of when the Contractors All Risks insurance is inoperative, so that permanent insurance arrangements can be made by the principal.
Insurance for the maintenance period under the contract
Liability for loss or damage to the works during any maintenance period is usually covered, subject to a specified time limit, which is normally 12 months.
An excess will apply to each and each and every claim, which may be increased for theft and malicious damage or other specified perils dependent upon the type of work and location.
Insurance for Own and Hired in Plant
Most Contractors All Risks policies can be extended to include loss or damage to own or hired plant.
Own plant is covered on an All Risks basis, and the sum insured should reflect the new replacement value of insured plant, unless agreed otherwise with the insurer. This is despite the basis of settlement for claims being on an indemnity basis, i.e. claims can be reduced to take into account wear, tear and betterment.
Hired plant is covered per the legal liability assumed by agreeing to the conditions of hire. Insurers will normally need to be advised if the liability assumed is more onerous than the Contractors Plant Association (CPA) model conditions in order to agree cover. The limit of indemnity provided may be on an ‘Any One Item’ or ‘Any One Claim’, and the selected limit needs to reflect the basis of cover operative with the latter taking into account any accumulation risk. Cover also needs to include the liability to pay continuing hire charges in the event of loss or damage to the hired plant, with the limit of indemnity and indemnity period (the maximum length of time the insurer will pay) selected reflecting the cost of lost hire and length of time needed to repair or replace the plant.
Exclusions under a contractors all risks insurance policy
As importantly as what is covered is what is not covered and a brief summary of some of the key excluded or uninsured areas is as follows:-
- Existing structures
- Cost of repair or rectification due to defective design, plan, specification, materials or workmanship
- Professional indemnity
- Liquidated damages
- Wilful act or neglect
- Loss of Profit or Revenue
Some of the above may be covered by separate insurances or by extension of the Contractors All Risks insurance.
For more general information on who requires contractors all risks insurance, how to buy it and how much it costs visit our “What is contractors all risks insurance?” page.