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Contract Works is an ‘all risk’ policy designed to protect a contract during construction. The policy encompasses two sections of cover, Material Damage and Liability.

The policy is available in two forms, Single Project or on an Annual basis. The Single Project policy will provide cover for a specific project, with the annual policy covering all projects during the 12 month period.

The Annual policy can be written on a ‘Turnover’ or ‘Run-Off’ basis and care needs to be taken with your annual declaration to ensure no gaps in coverage. Turnover, also known as ‘Transfer’, will only cover the work undertaken during the policy period, while Run-Off will cover any contract commencing during the policy period through to completion of the project (or expiry of cover as per the wording).

Cover can be arranged by either the Principal or the Builder (or an Owner Builder), Developer, Contractor or joint venture or Private Public Program, and can extend to any party who has an interest in the project(s).

In general, a Contract Works policy will insure the value of the contract for physical loss or damage, for all risks not otherwise excluded, and will provide a number of additional benefits to assist in getting the project back on track following a loss.

The Liability section covers your legal liability to pay compensation to a third party for bodily injury or property damage arising from your negligence in undertaking your insured activities.

Additionally, various coverage extensions are negotiable, such as:

  • Delay in Start-Up
  • Liquidated Damages
  • Advanced Consequential Loss
  • Advanced Loss of Profits
  • Difference in Conditions
  • Excess Buy-Down
  • Design Exclusion Drop Down

What aspects of construction projects are insured as part of a Contract Works insurance policy?

  • Accidental damage to on-site materials
  • Theft of on-site materials
  • Third party property damage
  • Third party injuries

How can I ascertain if I need Contract Works Insurance?

If any of the following are relevant then you should speak to your broker about a Contract Works Insurance policy:

  • You operate as a builder/tradesperson
  • Your business involves executing construction projects
  • You are temporarily or infrequently contracted to work within the boundaries of construction sites
  • Your business regularly engages in renovations or other similar activities
  • You have project materials in storage or transit

Do I need a Public Liability Insurance policy if I have a Contract Works policy?

A Contract Works Insurance policy can include Public Liability Insurance and is quite often broader to include:

  • Sub-Contractor Liability
  • Products Liability
  • Cross Liability

What are the various market defect exclusions in a Contract Works insurance policy and what is excluded?

Exclusion Summary
DE1 Outright Defect Exclusion

a)    Excludes everything

DE2 Extended Defect Exclusion

a)    Excludes Property Insured in a defective condition due to DWM

b)    Excludes Property which relies on the support of defective property in a)

c)    Excludes Property Insured damaged to enable repair of a) & b) (i.e. access costs)

d)    Covers other Property Insured free of defect but damaged as a consequence

 

DE3 Limited Defective Condition

a)    Excludes Property Insured in a defective condition due to DWM

b)    Excludes Property Insured damaged to enable repair (i.e. access costs)

c)    Covers other Property Insured free of defect but damaged as a consequence

 

DE4 Defective Part

a)    Excludes “Component Part” of Property Insured in a defective condition due to DWM

b)    Excludes Property Insured damaged to enable repair (i.e. access costs)

c)    Covers other Property Insured free of defect but damaged as a consequence

 

DE5 Design Improvement

a)    Excludes costs of improvements

b)    Covers other Property Insured free of defect but damaged as a consequence

 

LEG1 Outright Exclusion

a)    Excludes everything

 

LEG2 Consequences Cover

a)    Excludes costs rendered necessary by defects in DWM

b)    Excludes costs to rectify the ‘defect’ if put in hand immediately prior to ‘damage’ (i.e. portion of faulty insured property itself and the access costs to get to it)

c)    Covers Damage less the above costs

 

LEG3 Improvement Exclusion

a)    Excludes costs incurred to improve the original DWM

b)    Covers all direct and indirect damage caused by defect from DWM (i.e. the faulty insured property itself and access costs)

 

 

DWMDesign/Plan/Specification

Workmanship

Material

Case Study

A number of steel framed industrial units are being erected on an estate. The design engineers have miscalculated the load on the bolts that secure the roof beams together. Mid-way through the project the bolts fail as the final roofing panels are being fitted to one unit, which collapses damaging the neighbouring completed unit.

Costs are incurred for replacing the bolts that failed, replacing the roof structure that was damaged when it collapsed, making good the damage to the supporting wall, repair of damage to the neighbouring unit, redesign costs for the defective bolts and replacement of the bolts already fitted in the other units.

How the policy responds to this loss is dependent on the Defects Exclusion applied in the wording.

Staff Profile

Peta_Kortum

Peta Kortum

Account Manager - VIC

Shane Richards

Account Manager – NSW