Which insurance policies do you need to adequately cover the risks related to a construction project and prevent the construction process from slowing down? In this article, we elaborate on your four most relevant options.
The four most relevant insurances in construction
Dutch law does not require parties involved in construction projects to take out insurances. Over the years, however, it has become common practice to take out insurances to cover a number of construction related risks.
In case of damage, during or after a construction project, to either the project or adjoining properties, several questions arise: what caused the damage, which party is (financially) responsible for the damage, is the damage covered by any insurance policy taken out?
Adequate insurance coverage could save all parties involved a lot of costs, legal discussions and time.
We do notice, however, that principals, building (sub)contractors, constructors, et cetera, are not always fully aware of the available construction-related insurance options.
In the remainder of this article, we will discuss your four most relevant insurance options. Any specific insurance policy is, of course, subject to its specific terms and conditions.
Construction All Risk insurance
The Construction All Risk (CAR) insurance is the standard project insurance for damage that may occur during the construction period (ending on the delivery date). Upon request, the maintenance period can usually be insured as well. Be aware though, the scope of the insurance coverage during the maintenance period is usually more limited than during the construction period. The CAR insurance is often taken out by the main building contractor or the principal. Under this insurance, all parties involved in the construction work can be listed as co-insured, such as the principal, the building (sub)contractors, the suppliers, the construction management, the architects, the constructors, and any other advisers working on the project.
The CAR insurance consists of several sections, with the section The Work being the most relevant. The section the Work covers (material) damages during the construction period as a result of loss of or damage to the work (building) itself.
Additionally, the section Liability can be taken out which covers (i) damages (property damage and bodily injury) caused during the construction process and (ii) damages in connection with work carried out during the execution of the work.