Insurance Union are specialist insurance brokers to the built environment. With over 30 years of combined experience, we've helped thousands of businesses place insurance that aligns with contractual and operational risks, with revenues ranging from $0 to over $250 million.
Contract Works Insurance protects construction works, materials on site, and materials in transit or storage against accidental loss or damage during a project. It is sometimes referred to as:
Most construction contracts require “The Works” to be insured, usually by the head contractor. In some cases, developers or principals may instead arrange a Principal Controlled Insurance Program (PCIP) to protect the project if a contractor becomes insolvent or the contract is terminated.
Common Contract Works claims
Public & Products Liability Insurance covers claims where your business is alleged to have caused injury to a third party or damage to their property.
Construction sites are complex environments with multiple contractors operating simultaneously, creating significant exposure to liability claims. Head contractors in particular carry higher exposure due to their responsibility for site safety and coordination of subcontractors.
Key liability risks
Trades and civil contractors often assume contractual responsibility for their own works under “back-to-back” subcontract arrangements.
It is important that the activities listed on the policy accurately reflect the work performed. Contractors frequently undertake multiple trades or disciplines, and incomplete descriptions can lead to uninsured exposures.
For example, a contractor performing carpentry, plastering and painting should ensure all activities are disclosed to the insurer.
Contract Works Insurance is designed to cover loss or damage to materials on a construction site, including materials in transit/storage. Also referred to as Material Damage, or when bought together with Public & Products Liability, the package can be known as Contractors’ All Risks (CAR) Insurance.
Most head contract conditions state, “The Works” are the head contractor’s responsibility and need to be insured for damage. Although less common, Principal Controlled Insurance can be purchased by owners and developers, allowing developers to control the insurance program and protect the project in the event of contractor insolvency or contract termination.
Claims examples include natural disasters such as bushfire, fire, earthquake, flood and water damage, subsidence and landslip, storm, tsunami or wind, as well as damage to property caused by defects, theft and malicious damage or vandalism.
Contract Works requirements can be passed on via sub-contracts in what’s termed “back to back” contracts. This usually happens on larger contracts or when working for higher tier principal contractors.
Checking whether you are responsible for damage to your own works is recommended as evidence of Sub-Contractor Contract Works Insurance is not always checked, potentially leaving you on the hook contractually without cover.
Civil contractors may find they are responsible for damage on site during early works. Pipes, dewatering, landslide and road surface repairs or replacement can be costly. We recommend reviewing the insurance clauses in your contract to check who is responsible for damage.
Claims examples include natural disasters such as bushfire, fire, earthquake, flood and water damage, subsidence and landslip, storm, tsunami or wind, as well as damage to property caused by defects, theft and malicious damage or vandalism.
Designed to cover you against claims for injury and/or damage to third parties, this is most businesses most important policy due to the potential legal costs and damages that could be awarded in one of the most litigious countries in the world. Head contractors generally take on more financial, contractual, operational and environmental risks than their appointed contractors, and it’s important to make sure your Public & Products Liability Insurance aligns as closely as possible with your contractual, operational and environmental risks.
One of the largest risks you and your insurers face is called “Worker to Worker” liability. Most construction sites have large numbers of contractors and sub-contractors on site at any one time, which creates a high-risk environment for third party damage and injury claims. As the head/principal contractor is responsible for the health and safety of workers on site, it’s important to have good risk management processes and procedures in place such as site inductions, work safe methods and accident reports, and statements & photographs in the event of injury or damage.
Other significant risks you and your insurers are exposed to include fire risks from hot work/welding, unauthorised site access, and vicarious liability from sub-contractor workmanship and/or defective products or specifications.
Similarly to Principal/Head Contractors Public & Products Liability, this policy is designed to cover you against claims for injury and/or damage to third parties.
Whilst there can be similar financial, contractual, operational and environmental risks taken by trades & civil contractors, one of the most significant differences is the activity or activities being undertaken. The head/principal contractor is generally referred to as “The Builder” whereas trades and civil contractors need to specify their business activities, and with some contractors carrying out multiple activities, it’s important all are specified in your schedule.
For example, a contractor may work as a Carpenter, Gyprocker, Tiler and Painting Contractor, and so should not have a policy that notes “Painter” only – unless all activities have been disclosed to the insurer.
Similarly, civil construction has various disciplines that should be specified. Is the business solely involved in excavation and site preparation? Or does the business build bridges and sea walls and/or flood defence, work gas & water escape, get involved in wet risks, or work on railways, airports or other high-rise hazardous locations or sectors?
If works are subcontracted, there are similar “Worker to Worker” exposures for trades & civil contractors, as well as fire risk from hot work/welding, gas & water escape, and injury caused by tools & plant.
Insurance Union are trusted insurance brokers with over 30 years of combined experience.
Contractual risks can apply to head contractors, trades, and civil contractors.
However only some can be transferred to insurers upon request.
In the event of property damage or personal injury some transferable contractual risks include:
In the unlikely event your contract requests you assume the liability for existing structures, a separate or additional policy will be required.
Examples of contractual risks that cannot be transferred to public liability insurers in the event of property damage or personal injury include:
If you’d like expert support with risk identification, analysis and management, contact the Insurance Union team today.
