Construction

This blanket liability coverage protects all parties involved in a construction project from liability arising from bodily injury or property damage to third parties during construction. 

Wrap-up liability insurance can either be purchased by the contractor in charge of the project (contractor-controlled) or the owner of the property (owner-controlled). 

Some advantages of Wrap-up liability include:

• A single policy that includes multiple coverages reduces the risk of having coverage gaps and insufficient limits.
• Cost savings, better protection and higher limits than purchasing multiple insurance coverages separately. 
• Significant time savings compared to managing multiple liability policies of subcontractors. 
• Simplifies the settlement of claims by eliminating lengthy litigation to establish blame.

Insured parties:

• Owners
• General contractor
• Project manager
• Sub-contractors
• Consultants, engineers and architects (subject to a professional liability exclusion).

Legal Expense

For small businesses that can’t afford to have a lawyer on retainer, this covers legal costs for unexpected legal events. It provides access to legal information and can be used to defend or pursue legal rights, including contract disputes and debt recovery.

Bonding & Surety 

A surety bond guarantees that an obligation (or contract) is fully satisfied. If it is not satisfied, the bond holder will be entitled to compensation for associated losses. Many clients, including those in government, will request you obtain a surety bond. Some Canadian provinces may even mandate a surety bond before work can begin.

A surety bond isn’t considered to be business insurance for a few reasons:

• It involves three parties
  • The owner and/or government body requesting the bond
  • The business responsible for fulfilling the obligation
  • The insurance/bonding company that guarantees the bond
• It’s paid out to a client, not to your business.
• You are required to pay back the entire amount of the bond to your surety provider.

Types of bonds:

Performance Bond – This guarantees that the obligation the contractor has with the owner is satisfied.

Labour & Material Bond (Payment Bond) – By guaranteeing the contractor will pay all subcontractors and suppliers in relation to the obligation (project), this limits the possibility of lien claims against the owner.

Bid Bond – This bond assures a contractor is prequalified to bid and they are serious about their obligations with respect to their tender and will follow through.

Consent of Surety (Agreement to Bond) – Not technically a bond, this is a commitment to provide the requested performance and/or labour and material bonds to the owner if the contractor is successful on their bid.

Maintenance Bond – This bond guarantees, for a specified period of time (typically one or two years), that the contractor’s work will be protected from any defects, faulty workmanship, and design.

Property

Property covers your physical assets including buildings, contents, electronics, inventory, machinery and equipment when damaged by perils such as fire, flood, windstorm, or earthquake.  It can cover the cost to repair or replace the damaged property for Replacement Cost or Actual Cash Value.

Actual Cash Value (ACV) covers the cost to repair, rebuild or replace with like kind quality LESS: Depreciation (wear & tear).

Replacement Cost Value (RCV) covers the cost to replace with a new, similar product of like kind and quality.

For example, a fire occurs on your premises and damages a laptop purchased 5 years ago for $2,000. 

ACV – you will be reimbursed the value of a 5-year-old laptop in the same conditions as the one destroyed in the fire. In this, case, the settlement may be $500.
RCV – you will be reimbursed for the value of a new laptop of like kind and quality that was destroyed in the fire. In this, case, the new laptop of the same specifications costs around $1,500.

Environmental Impairment Liability (or) Pollution liability insurance protects businesses against third-party claims and first-party exposures resulting from pollution conditions. These claims could be for costs associated with the cleanup of contaminated sites, third-party bodily injury, and property damage claims arising from environmental incidents, such as spills or leaks of hazardous substances. It can also address regulatory fines and legal defense costs related to environmental lawsuits.

Covers all property being incorporated into a project during the construction phase. It is designed to protect against direct physical loss or damage to a project as well as construction material waiting to be installed onsite, in transit or offsite.

This type of policy is recommended for all types of projects including: 

• Residential new builds
• Renovations
• Commercial buildings
• Industrial buildings
• Civil buildings and projects (i.e. bridges, dams, etc.)

Common Exclusions

Course of construction insurance is designed to cover damage caused by accidents, not faulty or improper material, workmanship or design. Other common exclusions include liability for property damage or bodily injury to third parties (covered under wrap-up liability insurance usually purchased for each project), equipment breakdown, work vehicles (which are covered under separate policies), employee theft as well as contractors’ equipment and tools.

Warranties

It’s critically important to be aware of any warranties in your policy wording. Common warranties for wood frame projects include having requirements for fencing, security, fire extinguishers, open flame or hot works procedures​, etc. Breach of a warranty voids your insurance coverage.

Equipment Breakdown

This coverage pays for sudden and accidental damage to mechanical or electrical machinery or equipment, commonly excluded in course of construction policies. It will also pay for repair or replacement, and is particularly important during the testing and commissioning phases.

Delayed Opening/Start-up

This coverage can be purchased in addition to a course of construction policy. It provides coverage for financial losses as a result of project delays caused by covered losses, which can include increased interest on financing, increased labour costs, and loss of anticipated rental income or revenue.