Compulsory contractor's liability insurance has lapsed: prohibition, ongoing project, CAR

A missed premium rarely seems like a big deal – until it turns out that compulsory contractor's liability insurance is not simply a policy but a condition of chamber registration and of taking on work. Government Decree 191/2009 (IX. 15.) gives the insurer a reporting obligation and the chamber the power to prohibit and to remove from the register, and the contract for an ongoing project typically also stipulates that cover must be maintained. As a broker, I see that most contractors do not know that, under the Ptk. (Hungarian Civil Code), late payment of the premium terminates the contract retroactively, and from that day there is no cover. This article goes through what happens, in what order, and what you can do.

How does the contract terminate – and from when is there no cover?

Under Section 6:449(1) of the Ptk., if the premium due is not paid, the insurer – with a warning of the consequences – calls on the policyholder in writing to pay, setting a thirty-day grace period counted from the date the reminder is sent; if the grace period expires without result, the contract terminates with retroactive effect to the due date, unless the insurer enforces the premium claim through the courts without delay. The retroactive effect is the key point: there is no cover not from the expiry of the grace period but from the due date of the missed premium. Under subsection (2), the policyholder may request reinstatement of a contract terminated because of non-payment of a subsequent premium within one hundred and twenty days of termination; the insurer may reinstate cover under the conditions of the terminated contract if the premium that previously fell due is paid – so this is the insurer's decision, and cover for the intervening period depends on the insurer's practice. Another reason for termination is cancellation: under Section 6:466(1) of the Ptk., an open-ended contract may be cancelled in writing, with effect from the end of the insurance period, with thirty days' notice. When changing insurer, the new policy must therefore run from the day the previous one terminates – even a single day's gap is a period without cover.

What happens at the chamber?

Under Section 21/F of the decree, the insurer reports the termination of the contract to the Hungarian Chamber of Commerce and Industry (MKIK) within 15 days of termination. Under Section 21/G and Section 37(1)(c), the chamber prohibits the continuation of the contractor's activity until a liability insurance contract is concluded, but for no more than six months; if the contractor does not meet its obligation within that time either, the chamber removes it from the register. To lift the prohibition, the certificate of cover of the new contract must be uploaded to the chamber's registration system (for a new registration, the decree requires a certificate no older than 30 days) – the chamber's guidance notes mention an 8-day deadline for uploading, and the suspension can be lifted by remedying the deficiency. Under Section 12(1a), a contractor may undertake only work for which it holds compulsory liability insurance, and under Section 12(2) maintaining the insurance is its duty. This obligation cannot be transferred: paying the premium, uploading the certificate and informing clients remain your responsibility – not the insurer's and not the broker's. How compulsory insurance relates to project cover is described in the article on the relationship between liability insurance and CAR.

The ongoing project: contract, client, subcontractor

Under Section 3(2)(r), the construction contract contains the policy number and the insurer's name (or the contractor's declaration that the insurance is in place), and most client contracts also stipulate separately that cover must be maintained – the typical clauses are collected in the article on insurance clauses in construction contracts. The termination of cover may therefore be a breach of contract: grounds for termination of the contract and the basis for a contractual penalty – and a contractual penalty is not an insurance loss, as the exclusion map also shows. In public procurement, under Section 26 of Government Decree 322/2015, liability insurance to the extent prescribed in the notice had to be taken out by the time the contract was concluded, and the contracting authority may also check it during the term of the contract; for state construction investments, the separate regime of Government Decree 55/2025 applies. The subcontracting chain needs particular attention: the main contractor's policy must extend to the subcontractors' activities, but a subcontractor – if it is itself a contractor – owes its own compulsory insurance; if its insurance terminates, it is the subcontractor that is prohibited, and the main contractor is left with the work. The article on the subcontracting chain sets this out in detail. For damage caused in a period without cover, the contractor is liable with all its assets under Sections 6:519 and 6:522 of the Ptk.

And CAR?

A project CAR policy is a separate contract: it has its own premium, its own due dates and its own Ptk. Section 6:449. The termination of the compulsory liability insurance does not in itself end it – but the two do meet at three points. First: if work stops because of the chamber's prohibition, CAR policy conditions typically require a longer stoppage to be reported, and they assess the risk of an unattended, half-finished site differently – the exact duration and the consequence depend on the policy conditions. Second: Section II of CAR continues to provide cover on the project for damage caused to third parties, but it does not replace the company-level compulsory insurance, because the chamber expects a certificate of cover with the content required by Section 21/C. Third: if CAR was taken out by the investor, the prohibition of the contractor may mean project delays and a change of parties, which must be reported under the policy – the routine for this is described in the article on reporting changes. And if the CAR premium is missed too, the same retroactive termination occurs in the middle of the project, leaving the works without cover at the worst possible moment.

What should you do if you have received a reminder?

• Pay the premium within the grace period – the contract then remains continuous, and there is nothing to report to the chamber.
• If the contract has already terminated: request reinstatement within the 120-day deadline or take out a new contract; clarify with the insurer what the cover extends to for the intervening period.
• Upload the new certificate of cover to the chamber system, and check whether a prohibition has been recorded in the register.
• Inform your clients as required by the contract, and while the prohibition is in force, do not undertake or carry out any construction work.
• Also check the premium payments of your project CAR and its conditions on work stoppages.

If you need a new quote, I prepare the comparison and the paperwork – paying the premium, uploading the certificate and making the reports, however, remain your obligations; nobody takes these over from you.

A question about your own company's insurance situation? Book a free 20-minute project consultation →

Sources

• Act V of 2013 – Hungarian Civil Code (Ptk.), Sections 6:449, 6:466, 6:519, 6:522
• Government Decree 191/2009 (IX. 15.), Sections 3, 12, 21/F–21/G, 37
• Építési jog (construction law portal): Everything there is to know about the compulsory liability insurance of contractors (updated 31 March 2025)
• MKIK (Hungarian Chamber of Commerce and Industry) guidance on compulsory contractor's liability insurance
• BKIK (Budapest Chamber of Commerce and Industry): Contractor's liability insurance compulsory from 15 January 2025 (upload deadline, suspension)
• Government Decree 322/2015 (X. 30.), Section 26

Related articles

• Contractor's liability insurance vs the CAR
• Insurance clauses in the construction contract
• Subcontractor chain: who does the policy cover?