Construction is a high risk industry. Personal injuries and property damage occur frequently, and these events ultimately cost the contractor money. Many times such claims could be covered under a Contractor’s All Risk (CAR) policy.
CAR policies, commonly referred to as Course of Construction or Builder’s Risk policies, insure against physical loss or property damage to works, plant, equipment and materials during the course of construction. Such policies can be complicated so contractors should take care to ensure that any coverage adequately covers the risks of the construction project to be undertaken. Many contractors can be caught short by failing to evaluate their potential liability risks in relation to the policy they are considering.
Here are some important rules to evaluate CAR policies:
- Conduct an insurance audit with a risk manager or broker to determine potential liability and any risk not covered by your current policy.
- Consult with your broker because many insurers can customize the coverage to match the needs of the project. The insurer needs time to do this effectively, so don’t wait till the last minute.
- Take note of exclusions because while most are expressly stated, others can be implied and can radically limit your protection. One frequently implied exclusion is consequential loss relating to loss of profits and expenses as an indirect result of the cause of the claim. Naturally occurring events such as deterioration due to mildew, rust, or obsolescence may also be deemed as implied exclusions.
- Confirm there are no unusual limitations on the measure of damages. The method in which your insurance carrier determines damages can significantly affect your bottom line.
- Carefully consider the period of coverage as it normally only extends to when the contractor is on site and ceases when the client takes possession. Ensure there is extended coverage should problems develop later on.
- Technological changes using business information technology opens many contactors to new risks if they incorporate design management in the construction project. Additionally, construction companies which use BIM also have to consider potential losses due to hacking or data corruption that would not likely be covered under a CAR policy.
- Review the excesses and deductibles to be applied by your insurer to determine if they are reasonable.
- Fully document your damages with the aid of an experienced consultant, as CAR carriers will strive to reduce the cost of damages. Costs stemming from prolongation of the claim may be restricted to maximum excess limitations.
- Use a legal consultant especially when preparing a major claim. They can guide you through any potential red tape and aid in negotiating a proper settlement.