Recent changes on requirements of construction insurance

In Canada most contractors and owners use the CCDC2 as their standard construction contract. Recently there are changes in the standard contract form which impacts insurance.

An example of change to the new contract includes a requirement that the limit of insurance for the project be equivalent to 1.1 times the contract price. This means that if the total construction value of the project is $5 million then the insurance policy has to be purchased with a $5.5 million limit. Naturally a higher limit will result in a higher premium. If the policy can be purchased with an automatic limit increase of 10% this might help to keep the overall costs reduced.

Another example that has an impact on the insurance policy is that the operations portion of the liability coverage has to be maintained for 395 days following substantial completion of the work. This used to be a 90 day clause. Again, this should have an impact on the insurance premiums.

Talk to your agent or broker to determine the impact that this ruling has on your construction projects.