When working on construction projects, ensuring that your insurance coverage is both comprehensive and correctly structured is essential. One key aspect that often raises questions is the need for a Contractors All Risks (CAR) policy to be in joint names. This requirement is common, but why exactly is it necessary, and what does it protect?
In this blog, we’ll break down why having a CAR policy in joint names is important and how it benefits both contractors and employers.
What Is a Contractors All Risks Policy?
A Contractors All Risks (CAR) policy provides coverage for physical damage to works and site materials, as well as third-party liability for property damage or personal injury arising from construction activities. It’s a critical form of insurance that protects against unforeseen events such as fires, theft, accidental damage, or adverse weather conditions.
For any party involved in the project, whether you’re a contractor or an employer, this policy provides peace of mind by ensuring that you’re protected from financial losses during the construction phase.
Why Joint Names on the Policy?
The primary reason for having a CAR policy in joint names is to ensure that both the contractor and the employer (or project owner) are covered under the same policy. Here are some of the key reasons why this is important:
1. Shared Responsibility for the Project
Construction projects involve multiple parties working together towards a shared goal, the completion of the project. Since the risks involved in construction affect both the contractor and the employer, a CAR policy in joint names ensures that both parties share responsibility for protecting the project from potential losses. Should damage occur, the insurance will cover all insured parties without the need for disputes over responsibility or liability.
2. Avoiding Gaps in Coverage
A CAR policy in joint names closes any potential gaps in coverage that could arise if each party held separate insurance. Without joint coverage, there may be discrepancies between the policies held by the contractor and the employer, leading to delays or complications in claims processing. With a joint policy, all risks are covered under a single, cohesive agreement, ensuring seamless coverage from start to finish.
3. Minimising Legal Disputes
In the event of a claim, a CAR policy in joint names can help reduce legal disputes. When a project experiences damage or loss, both the contractor and the employer can directly claim under the same policy without questioning which party is responsible for filing the claim. This eliminates any finger-pointing or disagreements over which policy should respond, and it ensures that claims are handled efficiently.
4. Contractual Obligations
In many construction contracts, there is a requirement for a CAR policy to be held in joint names. This protects the financial interests of both the contractor and the employer and it ensures that the insurance aligns with the obligations agreed upon in the contract. Failing to adhere to this requirement can leave one or both parties exposed to unnecessary financial risk or even breach of contract.
5. Mutual Insured Status
A CAR policy in joint names ensures that both the contractor and the employer are considered mutual insured parties. This is important because it means that the insurer cannot pursue one party to recover costs from a claim that was paid out, a process known as subrogation. Without a joint policy, the insurer could, in theory, pay out a claim to one party and then seek recovery from the other, which can lead to further legal and financial complications.
How Does Joint Naming Work in Practice?
When a CAR policy is issued in joint names, it simply means that the policy covers both the employer and the contractor under a single insurance contract. Both parties are listed as insured parties on the policy document. In the event of a claim, both parties have the right to submit a claim and receive compensation, which removes any ambiguity about which party the insurer should deal with.
Additionally, having a policy in joint names doesn’t increase the cost significantly, it simply ensures that both key stakeholders in the project are protected equally.
Key Benefits of Jointly Named CAR Policies
- Comprehensive project protection: All parties have equal insurance coverage.
- Simplified claims process: A single policy minimises disputes and simplifies the claims procedure.
- Compliance with contractual terms: Ensures all parties meet their contractual insurance obligations.
- Prevents subrogation issues: Both parties are equally protected and the insurer cannot pursue one party for recovery after a claim.
A Contractors All Risks policy in joint names is not just a formality; it is a vital component of ensuring smooth, comprehensive protection for all parties involved in a construction project. By jointly insuring both the contractor and the employer, this type of policy minimises the risk of coverage gaps, legal disputes and administrative hurdles, providing a more efficient and effective safety net for the project.
At Sustain Insurance Brokers, we specialise in helping businesses secure the right insurance solutions tailored to their needs. If you’re embarking on a construction project and want to ensure your Contractors All Risks policy is properly structured, we’re here to guide you through the process.
Contact us today to discuss your CAR insurance needs and protect your project with the right coverage.
