Contractors Insurance, or what is commonly referred to as Builders Insurance, is an important cover for anyone undertaking a construction project or employing a contractor.
There are many things that can go wrong during the construction phase of a project, including physical injury and third-party property damage.
For builders, one of the most effective ways to confront these risks is through a Contractors All Risk (CAR) insurance policy.
The scope of this coverage, available with a BF&M CAR policy, varies considerably — from a minor residential refurbishment to a full-scale commercial property development.
The coverage provided under the Contractors All Risk insurance policy is available under two sections — All Risk Property Cover and Public Liability Cover.
All Risk Property Cover
The All Risk Property section of the CAR policy covers contract works, temporary buildings and equipment, and other structures.
It also covers temporary work, theft of building materials and all other objects intended for incorporation in the works, supplied by or for the insured whilst on site in connection with the contract.
This section however will not provide coverage as a result of damage to existing structures unless expressly accepted by BF&M.
This section of the policy is particularly critical, especially where there is significant potential for damage to the contract works themselves.
If damage occurs to the works at any stage prior to handing over the completed works, the contractor could be held liable to the property owner or developer for loss to the partially-completed work and any additional cost overruns as a result of delays in contract.
Thus, the closer to hand over the works are, the more expensive a potential loss will be.
Advanced loss of rent or profit
In addition to the All Risk Property Cover, the policy can also provide coverage for the loss of rent or profit.
Thus, if the developer is reliant upon the building being occupied at the end of the contract, any delays brought about by insured or contractor damage could cause a loss.
The BF&M CAR commonly covers delays in rental income, the cost of additional interest from loans or the impact on the business profit caused by the delay.
A CAR policy also provides coverage to the builder or property owner on an All Risk basis.
As a result, the policy will provide coverage in most circumstances, except in the following instances: Fault, Inevitable Damage and Gradual Causes; Defective Materials and Workmanship; Explosion of Plant; Cessation of Work; Money; Disappearance or Shortage; Marine, Aircraft and Motor Liability; Permanent Works; and Existing Structures.
As with most insurance policies, the loss paid by the insurer will be subject to a deductible or an excess before the insurer pays the claim.
Thus for natural catastrophe perils — hurricane, cyclone, tornado, windstorm, storm, tempest, rainstorm, hailstorm, earthquake, seaquake, tidal wave, volcanic eruption and tsunamis — a one per cent policy excess of the sum insured applies per location, with a minimum contribution of $5,000 and a maximum contribution of $25,000.
Public Liability Cover
A CAR policy also provides coverage for any third-party property damage or bodily injury as a result of contractor, property developer or property owner negligence.
In addition, this section of the policy shall provide any court costs plus the legal costs of your defence.
The most common sources of liability are: Negligence; Nuisance; Trespass; Breach of Statutory Duty.
The coverage under a CAR insurance policy is generally very broad. However, it is important that the insured is aware of the circumstances under which the policy will not respond.
Thus, the following exclusions should be noted: Claims Made for Judgments outside Bermuda; Employers Liability; Workers Compensation; Property belonging to or held in trust by the Insured; Insured Property; Vibration and weakening of support; Inevitable Damage; Maintenance Period; Marine, Aircraft and Motor Liability; Contractual Liability; Pollution and Contamination.
It should be noted that even with these policy exclusions, some coverage can be made available after a discussion and approval of your BF&M underwriter.
It should be noted that in some instances there are coverage extensions available for an additional premium.
Policies can be written on an annual or specific basis.
This is for contractors undertaking regular contract work.
An annual policy provides cover for all contracts undertaken within the year, subject to a chosen maximum contract value. As a result the contractor would not have to contact BF&M every time a new contractor begins a new contract.
The premium for an annual contract will be based upon the estimated annual value of contracts at the start of the policy year, and is adjusted when the actual figures are declared at the year end.
This can be arranged by the contractor or property owner (in joint names if necessary) for any contract.
A specific contractor’s policy will cover that contract including the 12-month maintenance period.
The premium is based upon the estimated contract price at the start of the policy and adjusted when the actual figure is declared at the completion of the contract.
• Newton Adcock is a senior development underwriter with BF&M. For a quote on your next construction project call 295-5566. BF&M has a committed team of professionals ready to serve you.