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In the contractor’s commercial combined covers, the rating for contractor’s own insurances will generally follow those for property/asset protection, revenue, liability and other covers.

Asset protection
- covers contractor’s own premises and it’s general contents including plant and machinery

- it will exclude the contract works undertaken away from premises as these will be covered by the contract works extension

- Plant and machinery may be insured while on the contractor’s own premises and under the contract works cover while at the contract site and in transit.

Revenue protection
- contractors have a need for revenue protection for all the work undertaken during the financial year and it may arise from a number of ways:

- own premises damage -> for example, a fire at the contractor’s office/yard may delay the completion of contracts due to loss of essential materials or plant. It may result a reduction in turnover or increased cost of working

- contract sites -> policy will include all contract sites where the contractor is working

- fines and damages penalties -> can be insured up to a fixed amount that a contractor may be liable to pay due to delays in completion of a contract, provided it is due to an insured peril.

Liability protection
- Contractor will require the standard EL and products liability policies
- Contractor will also need to arrange a proper third party liability protection in place.

Employer’s liability
- the contractor will have its own full or part-time employees
- it will also use sub-contractors which may be a mixture of:

- Bona-fide sub-contractors, and labour only sub-contractors

- For a contractors combined policy, employee is defined to include

- persons engaged as a labour only sub-contractor (who are working on the site under the control of the insured)
- Self-employed persons working under the control of the insured
- Drivers or operators of hired-in-plant
- Labour masters or a persons employed by a labour master

Labour only sub-contractor
- they will work under the direction of the contractor and will therefore be automatically included under the contractor’s liability cover
- they are likely to have their own EL cover

Bona-fide sub-contractors
- will usually have their own EL cover even though their employees work under the direction of the main contractor
- responsibility to insure them lies with the bona-fide sub-contractors
- contractor is obliged to check that they have their own EL cover

Public liability
- contractor’s PL policy must include cover for death or injury arising from the works being undertaken

- it must have an annual policy with a limit of indemnity

- bona-fide contractors are not protected for third party liabilities

- contractors must make sure bona-fide contractors have their own PL cover in place with adequate limit of indemnity

- if bona-fide contractors limit is inadequate, claims may be lodged against the main contractors’ policy

- main contractors cannot subrogate against bona-fide sub-contractors’ insurers because of the terms of the contract

- main contractor can arrange a contingency type cover to protect itself in such situations.

- this will be reflected in the PL rates charged

Property under custody and control
- this is one of the standard exclusions under the policy
- this exclusions has to be amended as contractors work on their employer’s property
- this amendment will cover the existing property but not the property worked on
Tool of trade
- Whilst the contractors vehicles are used as tools of trade, the contractor’s public liability policy will provide cover for injury or damage to third parties and their property
Work abroad
- Some insurers may provide this cover
- The insurer needs to be familiar with the local conditions and to understand the difference in contract terms
- Some countries insist the PL cover must be arranged locally

Contract work insurance is also known as Contractors All Risks. The contract specifies the extend of property and liability covers which the contractor needs to arrange to make sure that work is being adequately protected. This insurance can be arranged as an extension to the combined policy or as a separate policy. The contract works policy will cater for a wide range of businesses such as builders, civil engineers, electrical contractors from small to big. Some of this businesses will offer full design, construction and maintenance service

For contract works, the factors taken into consideration for underwriting are:

Name of proposer - Can have a number of names appearing as the proposer, all having a valid insurable interest in the property
- Contract conditions will dictate that the insurance needs to be in joint names of the employer and the contractor - Contract conditions may also required the inclusion of sub-contractors

Trade or businness - Essential to provide full description of work and all activities
- Although the contract works relate only to the site being worked on but it can impact the business interruption and liability sections of the combined policy
- The insurer will have the following 2 categories
- Accept -> construction of private dwelling
- Avoid -> contractors who use heat eg. demolition contractor, roofers

Premises/Location - Premises/location can be specific (one location) or `any contract sites on which the insured is engaged in carrying out his business’ – (insurance is on annual basis)

Property to insure - It is the contract works and will include the permanent works including unfixed materials and the temporary works

- works on the site anywhere in UK including transit while in the course of construction until handed over by the contractor to the principal or employer on practical completion

- The type of work may vary:
- repairs to bulding
- constructions of houses, shops, factories and warehouses
- Construction of bridges, harbours, sea walls, airfields, reservoirs, roads, tunnels, oil refineries and chemical plants etc

- Permanent work is the main subject of the contract that is being built eg. houses, shops, factories, bridge
- it will also include unfixed materials, eg copper pipes, PVC pipes etc either on the contract site or on the premises of the suppliers and sub-contractors

- Temporary work/offsite storage
- This will include site huts, access roads and scaffolding which will be removed once the project is completed

- Additional risks like the following can be insured with a separate sum insured as part of the contract:

Own plant
- Construction plant, scaffolding, tools and other equipment for use in connection with the contract works
- Generator
- Cement mixers
- Earth breaker
- Diggers
- Powered or non-powered hand tools
- Ladders and access towers
-Plant storage containers

Hired-in plant for contract works
- Expensive machinery that can be used for only one project may be hired instead of purchased
- The contractor will be responsible for all this hired-in plants
- Some examples of this machineries:
- Tracked excavator
- Combined excavator loader
- Mobile crane
- Tower crane
- Aerial access platform

Employees’ effects
- this are employees’ personal effects and tools for which the insured is responsible
- the items are owned by the employees and use in their day-to-day activities
- These tools comprise of:-
* Drills and drill bits
* Routers
* Electric saws, jigsaws, hand saws
* Non-mechanical hand tools

Extension of cover for contract works insurance

- Immobilized plant recovery
- plant can become bogged down in heavy ground conditions.
- Provides for cost of recovering such plant

- Negligence breakdown of Hired-In Plant
- Indemnifies the insured in respect of liability assumed under the hire conditions

- Continuing hire charges
- Covers the insured’s legal liability to pay hire charges following loss or damage to the hired plant

The contract work is a property damage cover which provides cover for the property insured against all risks of loss or damage. Contract works all risks insurance contains the general property damage exclusions including some exclusions specific to contract works insurance. Electrical and mechanical breakdown should be insred under the engineering extension or a separate engineering policy.

Specific exclusions peculiar to contract works :-

- Penalties –> fines and penalties for late completion
- Existing property (prior to contract) – existing property must continue to be insured under the existing insurance with the description of the property altered to ensure that it reflects the type of work being undertaken.
- Defective property – defects in material or poor workmanship
- Loss or damage after completion
- Errors or omission in design
- Damage to external structures not part of the contract