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Canada | Publication | September 2022
This article was co-authored by Louis-Martin Richer from Marsh Ltee.
The insurance products used to cover construction works and some of the risks resulting therefrom are numerous and complex. Owners, contractors, sub-contractors and professionals may find it difficult to make heads or tails of them due to the technical jargon of insurance policies.
Still, this type of insurance is crucial for any construction site. It gives owners quick access to funds (in the form of insurance indemnity) so they can rebuild the work in the event of a loss, limiting recourses before the courts. For contractors, sub-contractors and professionals, insurance covers some of the risks for which they are liable.
Here is a quick reference to give you a better understanding of the insurance products generally used to cover construction works.
Builder’s Risk insurance – Covers material damage to the work itself
Wrap-up liability insurance – Covers property damage or bodily injury to third parties
Professional liability insurance – Covers third party damages resulting from the consequences of professional acts
Properly assessing the insurance products specific to your construction project
When drafting the insurance clauses that are to be included in construction contracts, notably in the context of public calls for tenders, consider consulting a lawyer who specializes in this area. Even though the CCDC clauses are generally adequate, they provide minimal coverage and are broadly worded. Depending on the project and its specific characteristics, an instructing party may want to obtain better or specific coverage by contractually specifying the coverages, coverage extensions, sublimits and exclusions its project requires.
For contractors, sub-contractors and professionals, a legal advisor will be able to revise the insurance coverage for a specific project – based not only on the insurance clauses provided for in the contracts, but also on the wording of the insurance policies actually taken out – and therefore identify what risks and property are not covered, an important aspect of sound risk management.
Finally, an insurance broker who specializes in construction is a formidable and even indispensable ally when it comes to taking out insurance or managing claims. The insurance market is constantly evolving, with new coverages, exclusions and requirements in such areas as pollution, delay in start-up and transit insurance. Optimizing coverage and managing financial risks require the specialized services of brokerage firms, such as market watches, claims appraisals and engineering services.
This quick reference is just that, a quick reference.
If you are taking out insurance for your construction project, we invite you to consult with your legal and insurance brokerage professionals.
Compagnie d’assurances Missisquoi c Constructions Reliance inc. (Construction Reliance du Canada ltée), 2018 QCCS 1049.
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