REALWorld Law



What insurances need to be put in place by law or under a typical construction contract?



Each party to a design or construction contract should always confer and obtain advice from its own risk manager or insurance agent regarding the types and limits of insurance that will best protect the risks with respect to each project. Architects generally carry professional liability insurance. Some contractors carry professional liability insurance as well. Both architects and contractors generally carry the following types of coverage:

  • Commercial general liability insurance providing coverage for the following: bodily injury, property damage, products/completed operations, premises/operations, contractual and personal/advertising injury liabilities, explosion, collapse, and underground hazards
  • Business auto liability insurance covering all owned, non-owned, and hired vehicles
  • Employer’s liability insurance that covers loss, damage, injury, or disease to employees
  • Excess/umbrella insurance in excess of the required commercial general liability, business auto liability, and employer’s liability coverages, and
  • Workers’ compensation insurance as required by provincial and federal requirements

The project owner will also usually specify that the contractor take out a builders’ risk policy, designed to insure against damage to the works under construction. This policy may also include delay in start-up coverage, to protect against a loss of revenue if construction is delayed by an insurable risk. 

Further, particularly for larger projects, it is also common for a project owner to take out its own “all risks” builders’ risk policy and “wrap-up” general liability policy, with the contractor and consultants named as additional insureds.

In addition to the above, other requirements with respect to insurance may be desirable. Examples include:

  • Setting forth the required rating for the insurance company providing the coverage
  • Requiring that the insurance company is authorized to do business in the jurisdiction of the project
  • Prohibiting cancellation or material changes in the policies
  • Providing for a waiver of subrogation to the extent permitted by the insurer
  • Naming additional insureds
  • Requiring subcontractors to obtain the same insurance, and
  • Requiring evidence of insurance