Contractors All Risk (CAR) insurance serves as a crucial safety net, offering protection against unforeseen events that can impact projects. However, it’s equally important to be aware of the common exclusions in CAR insurance to ensure that your coverage aligns with the unique challenges faced by construction businesses in South Africa.
What is Contractors All Risk (CAR) Insurance?
Before delving into the exclusions, let’s establish a foundational understanding of CAR insurance. This policy is designed to provide comprehensive coverage for construction projects and South African contractors.
It typically encompasses risks related to third-party liability, damage to property, and the construction works themselves. While it forms a robust shield against a range of perils, there are certain exclusions that contractors should be mindful of to avoid potential pitfalls, loss of contracts, and uninsured financial costs.
7 Common Exclusions in Contractors All Risk Insurance: An In-Depth Guide
From excluded contracts to other general exceptions, this in-depth analysis equips South African contractors with vital insights into the common exclusions found in Contractors All Risk policies – ensuring you have the necessary knowledge to protect your growing enterprise in the construction industry. While this article covers a comprehensive list of exclusions, it is highly recommended to read the specific policy wording of your insurer, as the details and exclusions may vary from one insurer to the next.
1. War, Riot, and Terrorism
When considering Contractors All Risk Insurance in South Africa, it’s crucial to be aware of common exclusions, particularly those related to war, riots, and terrorism. This policy typically does not cover losses resulting from civil disturbances, including riots, strikes, or public disorder.
Moreover, incidents linked to war scenarios – such as invasions, acts of foreign enemies, and civil wars – are generally excluded. This category also encompasses actions aimed at influencing government decisions or promoting political change, ranging from mutinies and martial law situations to acts of terrorism. These acts of terrorism are defined as aggressive acts for political, religious, or ideological reasons, with the goal of impacting governmental actions or creating public fear.
In the context of riots and public disturbances in South Africa, SASRIA (South African Special Risks Insurance Association) cover plays a pivotal role. SASRIA is a unique, government-supported insurance provider that specifically covers losses due to riots, strikes, and civil commotion – events typically excluded in standard insurance policies.
This cover is crucial, especially in volatile situations, as it ensures that businesses, including contractors, have financial protection against damages caused by such civil unrest. Integrating SASRIA cover into your insurance portfolio can be a wise decision to safeguard your projects against the unpredictable nature of public disturbances and their potentially devastating financial impacts.
The Nuclear Exclusion explicitly states that the policy does not cover any legal liability, loss, damage, cost, or expense, including consequential losses – arising directly or indirectly from various nuclear-related events.
These events encompass ionising radiation or contamination by radioactivity from nuclear fuel or waste, nuclear material, fission or fusion, nuclear radiation, nuclear explosives, any nuclear weapon, and nuclear waste in any form.
Importantly, for the purpose of this exception, the term “combustion” extends to any self-sustaining process of nuclear fission.
Therefore, the policy explicitly excludes coverage for losses or liabilities associated with nuclear activities, emphasising the importance of understanding and acknowledging these exclusions in your policy terms.
3. Asbestos Exclusion
The Asbestos Exclusion states that irrespective of any other provision or exception within the policy, it does not cover legal liability, loss, damage, cost, or expense arising directly (or indirectly) from the hazardous nature of asbestos.
This exclusion applies to all events involving asbestos, regardless of its form or quantity. The policy emphasises that this exclusion takes precedence over any conflicting provision, exception, extension, or general exception within the policy.
Simply put, the Asbestos Exclusion makes it clear that the policy doesn’t cover any risks related to the presence or impact of asbestos.
4. Computer Losses
The Computer Losses provision explicitly excludes cover for several scenarios related to computers. It does not cover the loss, destruction, or damage to any property, including computers, and excludes any resulting expenses or legal liabilities.
Specifically, the policy does not provide coverage for losses directly (or indirectly) caused by the failure of any computer to handle dates correctly, process data, execute commands, or safeguard information from issues such as program errors, viruses, or other unauthorised code.
The definition of a computer includes various devices and software, encompassing data processing equipment, microchips, and related equipment.
A Special Extension to this exclusion allows cover for losses caused by fire, explosion, lightning, earthquake, storm, wind, water, snow, aircraft impact, or impact by animals, trees, aerials, satellite dishes, or vehicles – as long as such losses are not due to wear and tear or gradual deterioration.
However, this extension does not apply to consequential losses covered by Business Interruption, resulting from the scenarios mentioned above. As a policy holder, it is vital to understand every exclusion and extension in your policy – highlighting the importance of having a reliable and trustworthy insurer you can trust.
5. Other General Exceptions
Within this policy, certain situations are explicitly excluded from coverage. Firstly, any losses tied to the government taking over or destroying property, or if intentional harm or negligence occurs, are not covered.
If work stops for more than 90 consecutive days, the policy won’t provide coverage for resulting losses. It’s worth noting that during Maintenance Periods, operations are covered only if they align with the insured’s contractual obligations.
Additionally, losses stemming from the termination of a contract by the Employer or the Contractor, or if the Contractor withdraws from the Contract, are not within the policy’s coverage.
Lastly, the insurer is absolved of liability if offering coverage would violate international sanctions set by entities like the United Nations, the European Union, the United Kingdom, Germany, or the United States of America.
6. Excluded Contracts
The Excluded Contracts section in a CAR policy outlines specific scenarios for which the insurer won’t be liable unless declared otherwise.
Firstly, contracts involving underground workings of collieries or mines are excluded from coverage. Additionally, work related to docks, harbours, piers, wharves, water-breakers, reservoirs, dams, canals, bridges, or structures near water, as well as petrochemical plants, waste incineration plants, fluidized bed combustion units, power stations, and risks falling under the National Key Points Act are not covered.
Thatch risks or sub-economic housing schemes, along with any risk situated outside the Territorial Limits, are also excluded. Furthermore, the insurer is not liable for claims related to contracts exceeding the specified Limit of any one Contract or damages and losses initiated before the policy’s acceptance date.
7. Effective Date and Run On Cover
Contractors All Risk Insurance policies will cover contracts that begin on or after the specified Effective Date in the Policy Schedule. If the insurer accepts contracts that started before this Effective Date, they won’t be responsible for any claims related to loss, damage, or liability that occurred before the policy was accepted.
If the insurer argues that a loss or damage has its roots before the policy’s start date, the insured (that being you) must prove otherwise.
This highlights the need to match contract start dates with the specified Effective Date and clarify/confirm when the insurer assumes responsibility for potential losses or damages.
Proactive Risk Management Strategies for South African Contractors | How To Minimise Your Risks and Liabilities
South African contractors face a myriad of challenges, from environmental factors to regulatory intricacies, making it important to adopt strategies that go beyond the conventional scope of insurance.
Comprehensive risk assessment stands as your initial shield of protection, and requires a meticulous examination of project-specific details:
- Risk Assessments: Before getting construction (CAR) insurance, thoroughly assess project risks. Identify potential issues and decide if you need extra coverage or risk management strategies.
- Tailored Insurance: Work with experienced insurance providers to customise coverage for your construction projects. Consider adding specific coverage or adjustments to address your project’s unique needs.
- Contract Review: Review and negotiate contract terms carefully to match your insurance coverage. Make sure your contractual obligations are realistic, reducing the chance of conflicts with insurance exclusions.
- Maintenance Protocols: Put in place strong maintenance plans to tackle wear and tear and prevent gradual deterioration. Regular inspections and upkeep can extend the life of structures and equipment – and reduce risks.
- Compliance and Documentation: Keep detailed records to comply with legal and regulatory requirements. Regularly update documentation to show adherence to building codes and industry standards.
- Additional Coverages: Think about extra insurance coverage, like Environmental Liability Insurance or Business Interruption Insurance, to fill gaps in coverage. This safeguards against specific risks not covered in standard construction policies.
Understanding Contractors All Risk insurance requires a combination of awareness, proactive risk management, and collaboration with experienced insurance professionals.
By understanding the common exclusions and implementing proactive solutions, South African contractors can fortify their projects against potential risks and ensure comprehensive coverage tailored to the unique challenges of the construction industry.
As projects evolve and risks transform, staying informed and proactive in your approach to CAR insurance is the key to success in the ever-changing landscape of construction in South Africa.
For further guidance on securing robust insurance coverage for your construction projects, reach out to our experienced team at Bi-me to learn how you can start.
*This is general information only and does not take into account your financial situation, needs, or specific objectives. As with any insurance, the cover will be subject to the terms, conditions, and exclusions contained in the policy wording.