Contractors' all risks insurance

Most construction contracts contain provisions which require insurance to be taken out to cover physical damage and/or loss of the works—such insurance is known as Construction All Risks, of which Contractors’ All Risks (often referred to as ‘CAR’) is a form. Contractors’ All Risks is a Construction All Risks insurance drafted in such a way as to identify the person who is to have the benefit of the insurance, rather than the damage that is covered.

A typical CAR policy covers construction works, plant and equipment up to their replacement value—if damage occurs to the contract works/plant covered, the insurance will (assuming all is in order and the insurer pays out) enable the property to be reinstated.

CAR policies will usually include three types of cover:

1. •

   damage to insured property

2. •

   ‘business interruption’ (consequential) losses

3. •

   liability of the insured(s) to third parties accrued in the construction project (often called ‘third-party liability insurance’ or ‘public liability insurance’).

Despite this type of insurance cover being referred to as ‘All Risks’, in practice, CAR policies only indemnify the insured for a specific category of risk relating