It's the perennial question in the CAR world: should the principal take out one large policy covering everyone, or should the main contractor bring their own? Both models work – on large projects, there are plenty of examples of each. There's only one wrong answer: when both sides assume the other has already sorted it out.
- Contractor-arranged cover: the main contractor takes out the policy, the principal checks it – the more common model.
- Principal-arranged cover: the principal takes out a policy extending to everyone – strong arguments favour this on large, multi-contractor projects.
- The decision needs to be fixed in the contract: who takes out cover, for what, for what sums, and until when.
- Whichever model applies, the whole cast of participants needs to be brought into the insured circle.
Contractor-arranged cover
The usual set-up: the main contractor takes out the CAR (or covers it from their open cover), and the contract and the tender set out the parameters. Its advantage is flexibility – the contractor fits it into their own risk management – and the fact that the premium is handled within the contract price. The principal's job here is checking: not whether the paper exists, but what it actually says – sums, scope, deductibles, duration: the checking article plus the checklist.
Principal-arranged cover
On large projects – multiple contractors, phased delivery, a high proportion of debt finance – there are good arguments for the principal's own policy: unified cover (no gaps or overlaps at the boundaries between contractors' policies), direct control (the principal sees and shapes the terms), and simpler coordination of claims. In return, the principal carries the administration, and the premium falls to them too – though it can be reflected in the contractors' prices. This model is common in residential block developments and large industrial projects.
The contract decides – in writing
Whichever model is chosen, the construction contract's insurance clause should fix: who takes out cover, what cover, with what sum insured and limits, what deductible, from when to when, and how it's certified. The clause's wording is also a legal matter – but it's worth having its insurance content reviewed by a specialist too, because a poorly drafted clause (an unworkable form of certificate, for example) can delay the start of the project.
The insured circle: the common denominator
The common minimum across both models: the policy's insured circle should cover the project's entire cast of participants – principal, main contractor, subcontractors, and, where justified, the designer too. That way, damage to the works caused between participants is typically settled within the policy – but liability losses that insured parties cause one another need a cross-liability clause, which has to be requested specifically. Details on managing the chain: the subcontractor chain; for a consortium set-up: the consortium article.
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