Contractor's All Risk (CAR)
Contractor's All Risk (CAR) insurance is a comprehensive insurance policy that provides coverage for both property damage and third-party liability for construction projects. It is designed to protect contractors, subcontractors, and project owners from the risks associated with construction work, including damage to the construction site or materials, as well as liability for injuries or damage to third parties caused by the construction activity.
Key Features of Contractor's All Risk (CAR) Insurance:
Property Damage Coverage:
Covers accidental damage to the property being constructed, including the materials, machinery, and other components of the project.
It applies to risks like fire, theft, storm damage, flooding, or accidents during the construction process.
It typically covers the construction site, materials on-site, and sometimes, materials in transit to the site.
Third-Party Liability:
Provides coverage for legal liabilities if the construction work causes injury to third parties (such as pedestrians or neighboring property owners) or damages their property.
It covers legal expenses and compensation claims arising from accidents at the construction site that affect third parties.
Coverage Duration:
The insurance usually lasts for the entire duration of the project and can also include a maintenance period, which covers damage or defects found after the project’s completion for a specified period.
Who Needs It:
Contractors: Protects their financial investment in the project and shields them from liability claims.
Subcontractors: Can also be covered, depending on the policy.
Project Owners: Can take out CAR insurance or require contractors to do so, as part of the project’s risk management.
What Contractor’s All Risk Insurance Covers:
Damage to the works: Physical damage to the construction project.
Temporary works: Includes temporary structures, scaffolding, and site equipment.
Materials in transit: Covers materials being transported to the site.
Damage caused by human error, accidents, or natural disasters.
Third-party injury or property damage claims.
What Contractor’s All Risk Insurance Typically Does Not Cover:
Normal wear and tear.
Poor workmanship or design errors (unless specified).
Pre-existing defects.
Intentional damage.
Example:
If a contractor is building a bridge and during construction, a heavy storm causes significant damage to the structure, CAR insurance would cover the costs of repairs. Additionally, if debris from the construction site causes damage to a nearby property, the third-party liability aspect of CAR insurance would cover any legal claims and compensation costs.