Construction Insurace – FAQ

What does construction insurance mean and what should the Contractor know?

It is known that the great worries and responsibilities of Contractors are not limited just to the usual duties with Public Authorities (Urban Planning Division, Social Security Agencies), the Subcontractors, the Suppliers or the Employer – Owner of the Project. They are broader and they consist part of his construction activities. They are related to damages – failures in the construction during works in progress, as well as to accidents occurring to Third Parties or to the workers. There are many cases in which Contractors “paid the price” for an accidental damage, a human error, a “bad chance”…     
Insurance is a modern “tool” that eliminates such particular “burden”. “Key” factor in order to be positive is the adequacy and completeness of the respective Insurance Policy. This is the Insurance Broker’s professional duty, who is in charge of the whole procedure (definition of insurance parameters negotiation with insurers, checking of the Policy, follow up and settlement of eventual damages).

What are the risks related to the Design and the Construction?

It is known that construction is rather complicated and time-consuming process where we have a combination of Capital (Financing), provision of Services (Design – Supervision – Consulting Services), Labour, Material and Mechanical Means provided by Contractors – Subcontractors. Inevitably, this process involves a series of probable risks that, if they occur, may cause damage to the Works itself, to Third Parties or to the working people. Especially, the following issues are pointed out:
  • Risks related to the Design – Supervision – Consulting Services
  • Risks related to accidental incidents (fire, flood etc), to unsual natural phenomena or to force majeure (earthquake, acts of God), sabotage etc
  • Accidents that occur to Third Parties or to Employees / workers during the construction
  • Construction technology risks of human nature, related to a design error, poor workmanship or to defective materials (respectively liability of the Designer, Contractor, Supplier,).

Can the above risks be covered?

YES, by a standard Policy called “Contractors All Risk” Policies (CAR / EAR) and “Designer’s – Consultant’s Professional Indemnity” Insurance, obviously without any abusive restriction or exclusions.
It is noted that also a specific Policy exists, covering the “10year Construction Guarantee” for eventual damages, due to latent defects, that might appear during the 10 year period after the reception of the completed works.

When should the insurance come into effect?

Upon the signing of the respective contract. That is, before the beginning of the construction of the works. Basically, every Contractor should have a concern even if such insurance is not contractually imposed by the Principal / Owner of the Project. The duration of the Insurance Coverage for the Construction and the Professional Indemnity for the work should necessarily be extended for a certain period after the completion of the works.

How can the Construction Insurance be implemented?

As any Insurance. Upon filling out of the Appropriate Application Form and the provision of the necessary information, with the assistance of a specialized Insurance Consultant/ Broker. The latter, offering appropriate guarantee through his own Professional Indemnity insurance coverage, should be able to:
  • provide correct information about the risks
  • negotiate the cost examining the terms of the insurance and
  • care of / or the effective settlement of eventual damages or claims that may occur.