Building projects—whether small residential developments or large-scale commercial construction—carry inherent risks. From unexpected site conditions to disputes over delays and defective workmanship, even the best-managed contracts can encounter complications. That’s where building contract insurance comes in.
At Blackstone Solicitors, we assist clients across England and Wales in understanding and negotiating construction risks. This article explains what building contract insurance entails, its relevance within construction agreements, and the key protections it offers to employers, contractors and other stakeholders.
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Defining Building Contract Insurance
Building contract insurance is a form of cover arranged in relation to construction works. Its purpose is to protect parties involved in a building contract—typically the employer (client) and the contractor—against financial losses arising from damage, delay, liability or other unforeseen events during the project.
Depending on the contract and nature of the works, the insurance may be:
- Mandated by the contract terms
- Jointly arranged by both parties
- Individually procured by the contractor or employer
- Customised to fit the risks of a particular site or scheme
The precise scope of cover depends on the policy terms and the type of building contract used—such as JCT (Joint Contracts Tribunal), NEC (New Engineering Contract) or bespoke agreements.
Building Contract Insurance vs Contractor’s All Risks (CAR)
While commonly confused, building contract insurance differs in focus and structure from standard Contractor’s All Risks (CAR) policies. Here’s how they compare:
| Feature | Building Contract Insurance | Contractor’s All Risks (CAR) |
| Who procures the insurance | Employer, Contractor, or jointly | Typically the Contractor |
| Policyholder | May include both Employer and Contractor | Primarily the Contractor |
| Coverage scope | Reflects contractual obligations and risks | Covers damage to works and liability |
| Alignment with building contract | Designed around contract clauses | Generalised cover; may need adapting |
Building contract insurance is tailored to the specific contractual arrangement, ensuring compliance with obligations and sufficient protection for all parties.
What Does Building Contract Insurance Cover?
Typical areas of coverage include:
1. Physical Damage to the Works
Protects against:
- Fire, flood, theft or vandalism
- Structural collapse
- Accidental damage during construction
This ensures the employer’s investment is safeguarded, and contractors can recover from disruptions without major financial strain.
2. Public Liability
Covers legal liability to third parties for injury or property damage caused during the works. For instance:
- A pedestrian injured by scaffolding collapse
- Neighbouring property damaged due to excavation
Often required by local authorities or lenders as part of compliance.
3. Employer’s Liability
Where applicable, this protects against claims made by employees or subcontractors injured during the works. It’s commonly mandated by law for businesses employing staff.
4. Professional Indemnity Insurance (where included)
Covers errors in design, advice or specification made by consultants or design-and-build contractors.
This is essential for projects involving architectural, engineering or specialist input.
5. Delay in Start-Up (DSU) / Advance Loss of Profits
Protects the employer against financial losses resulting from delays in project completion, such as:
- Rental income losses
- Missed operational deadlines
Particularly relevant in commercial developments.
Legal Implications Within Building Contracts
Many standard form building contracts include express clauses regarding insurance obligations. For example, JCT contracts may stipulate:
- Insurance Option A – Employer insures the works
- Insurance Option B – Contractor insures the works
- Insurance Option C – Joint insurance arrangement (commonly used in refurbishment)
These clauses specify:
- Which party must procure the policy
- Minimum cover levels
- Duration of cover
- Specific risks to be insured
Failing to comply may constitute breach of contract or leave parties exposed to uninsured risks.
Common Scenarios Requiring Building Contract Insurance
Building contract insurance is typically required in:
- New-build developments where structural damage risks are high
- Refurbishment or conversion projects involving occupied buildings
- Residential extensions or improvements funded by homeowners
- Commercial or industrial construction with tight deadlines and operational dependencies
- Projects involving subcontractors or multiple stakeholders
Employers and contractors must assess who holds the risk and ensure insurance arrangements reflect the contractual allocation.
Key Considerations When Arranging Insurance
To ensure the cover is adequate and compliant:
1. Check the Building Contract Provisions
Understand what insurance is required under the contract terms. Misunderstanding obligations can lead to disputes or uninsured losses.
2. Assess Risk Exposure
Consider the nature of the works, site conditions and third-party exposure. More complex or high-value projects may require bespoke cover.
3. Confirm Policy Terms and Exclusions
Review:
- Scope of cover
- Excess and indemnity limits
- Excluded events or liabilities
- Duration of insurance
Solicitors can assist in aligning policy wording with the contract.
4. Clarify Policyholder and Beneficiaries
Ensure that the employer, contractor and any funders are named appropriately to avoid disputes over claims entitlement.
Risks of Inadequate or Non-Compliant Insurance
Lack of proper building contract insurance can lead to:
- Financial exposure for damage, liability or delays
- Disputes between contractor and employer over who bears loss
- Breach of contract with potential termination consequences
- Claims rejection due to incorrect policyholder or inadequate terms
- Reputational harm and operational delays
Insurance clauses must be taken seriously and integrated into project planning—not treated as a mere formality.
How Blackstone Solicitors Can Help
At Blackstone Solicitors, we advise clients at all stages of construction projects. Our services include:
- Reviewing building contracts for insurance compliance
- Negotiating appropriate insurance clauses
- Liaising with insurance brokers and policy providers
- Resolving disputes over coverage and liability
- Supporting contractual enforcement following claims or breaches
We understand the technical and commercial realities of construction risk—and ensure that clients are legally protected every step of the way.
Final Thoughts
Building contract insurance is a critical safeguard in construction projects. It helps protect against physical damage, legal liability and financial loss—all of which can undermine a scheme’s success. Whether you’re a developer, contractor or private client, it’s essential to understand your obligations and ensure cover is robust, compliant and fit for purpose.
At Blackstone Solicitors, we provide clear, strategic legal advice to help you navigate building contract insurance with confidence—minimising risk and securing your investment.
We have a proven track record of helping clients deal with construction law. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of construction law services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/construction-solicitors/
How to Contact Our Construction Solicitors
It is important for you to be well informed about the possible implications of a construction issue. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Construction solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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