Commercial Policy Knowledge Centre
Construction / Engineering
Policy guide
Contractors’ and Erection All Risks Insurance
Project insurance for accidental physical loss or damage during construction, erection, installation, testing, and related phases, with the scope divided between CAR and EAR according to the project.
01
Who needs it
- Project owners, developers, main contractors, subcontractors, financiers, joint ventures, and equipment suppliers with an insurable interest.
- Civil works such as buildings, roads, bridges, tunnels, ports, airports, utilities, and infrastructure projects under CAR.
- Mechanical and electrical erection projects such as plants, production lines, power assets, refineries, data centres, and machinery installation under EAR.
- Projects requiring third-party liability, existing-property, plant, testing, maintenance-period, or delay-in-start-up extensions.
02
Core cover
- Physical loss of or damage to insured contract works, materials, and temporary works during the defined project period.
- Erection, installation, testing, and commissioning exposures where declared and included under EAR or combined project wording.
- Third-party legal liability arising from project activities when a liability section is included.
- Optional cover for construction plant, existing or surrounding property, debris removal, professional fees, maintenance visits, and DSU/ALOP.
03
What is commonly not covered
- Wear and tear, gradual deterioration, inventory shortage, wilful misconduct, and ordinary rectification without insured damage.
- The cost of correcting defective design, material, or workmanship to the extent excluded by the selected LEG, DE, or other defects clause.
- Liquidated damages, penalties, loss of contract, delay, or financial loss unless a specific DSU/ALOP cover responds.
- Existing property, plant, transit, off-site storage, testing, or maintenance exposure outside the declared scope or period.
- War, nuclear, sanctions, cyber, pollution, and other exclusions unless separately addressed.
04
Underwriting information
- Project description, contract structure, insured parties, EPC arrangements, responsibilities, values, and financing requirements.
- Site location, geotechnical reports, surveys, flood and catastrophe exposure, surrounding property, access, and security.
- Design standards, method statements, temporary works, contractor experience, quality controls, testing, and commissioning plans.
- A detailed construction programme showing critical path, milestones, testing duration, phased handover, maintenance, and cessation exposure.
- Value breakdown including materials, freight, duties, free-issue items, escalation, plant, existing property, and DSU/ALOP financial data.
05
Common mistakes
- Failing to insure all parties required by the contract or to align waiver, cross-liability, and principal’s-indemnity provisions.
- Allowing the policy period to expire before testing, commissioning, handover, or maintenance obligations finish.
- Assuming every design or workmanship defect is covered because the policy says “all risks.”
- Omitting existing structures, surrounding property, off-site storage, transit, escalation, freight, duties, or free-issue materials.
- Buying DSU/ALOP without matching the insured delay trigger, critical path, financial model, and indemnity period to the project programme.
06
Claims issues
- Establishing when damage occurred, which project party had responsibility, and whether the asset was under construction, testing, handover, or maintenance.
- Separating the excluded defective component or rectification cost from insured resulting damage under the applicable defects clause.
- Documenting method statements, drawings, daily records, photographs, weather, inspections, change orders, and the immediate mitigation response.
- Coordinating property damage, third-party liability, professional indemnity, marine transit, and DSU/ALOP components.
- Quantifying delay against the critical path rather than treating every project slippage as an insured DSU loss.
07
Critical wording points
- Named insureds, additional insureds, joint-insured status, cross liability, waiver of subrogation, and principal’s indemnity.
- Definition of contract works and territorial boundaries, including transit, off-site storage, temporary works, and free-issue materials.
- Attachment, testing, commissioning, phased handover, cessation, maintenance, and defects-liability periods.
- LEG/DE or equivalent defects wording and the distinction between defective property, rectification, and resulting damage.
- Existing property, surrounding property, vibration/removal/weakening of support, debris removal, professional fees, escalation, and DSU/ALOP.
Related policies
Marine CargoProfessional IndemnityPublic LiabilityDSU/ALOPContractors Plant and Equipment
Policy-wording boundary
This guide explains common market structures. Actual coverage may depend on the insurer, jurisdiction, schedule, declarations, endorsements, definitions, exclusions, conditions, facts, and complete policy wording. Obtain professional advice and written insurer confirmation for a specific risk or claim.