What Is Contractors' All Risks Insurance?

When Does Contractors' All Risks Cover Attach?

A Contractors' All Risks policy, known in Turkey as İnşaat All Risks, indemnifies physical loss to the values on site during construction. It rests on the Construction Insurance General Conditions, in force since 1 February 2009. Article A.1 ties cover to loss or damage suffered by the insured values, within the period of cover and while on site, from a cause that is sudden and not previously known.

Those two words set the threshold. Deterioration that is already known, continuing or gradual is not sudden; the policy answers for an unforeseen event, not for a defect surfacing over time.

The start of cover is fixed by a physical event rather than a date. Under Article A.5, cover begins, on the basis of the inception date shown in the policy, from the moment the insured values are unloaded on site, or from the expiry of the marine or transit policy where one exists for the materials. Unless agreed otherwise, cover incepts and expires at 12.00 noon Turkish time.

A stoppage has its own rule. Where construction work is continuously suspended for more than one month, cover is suspended on the insured's written notice, and once work resumes the period is extended by the number of days lost.

Who Has to Buy the Policy?

In public works the answer sits in statute. Article 9 of Law No. 4735 on Public Procurement Contracts requires the contractor to insure all vehicles, materials, stockpiled goods, plant and service machinery, transport and installations at the site, together with the contract works, against natural perils such as earthquake, flood, landslide, storm and fire and against risks such as theft and sabotage, for the period from the start of work to provisional acceptance.

The same article names a second period: for the time between provisional acceptance and final acceptance, an extended maintenance period cover with a scope set out in the tender documents is required. In a public contract the policy therefore forms a chain reaching to final acceptance.

Private projects work differently. There is no general statutory duty to insure a construction project, so the obligation arises from the contract between employer and contractor, or from a condition imposed by the financing institution.

Who is named as insured is not a formality either. A claim is paid to the party holding the insured capacity under the policy, which is why the position of employer, contractor and subcontractors is settled at quotation stage.

What Does the Third Party Liability Extension Change?

The body of the policy answers for damage to property being built; harm to a neighbouring building, a passer-by or a parked car is not inside that body. Article A.3 of the general conditions lists the insured's legal liabilities for losses suffered by third parties among the matters that may be brought into cover by supplementary agreement. Without that extension, damage crossing the site boundary falls outside the policy.

The Third Party Liability Insurance General Conditions, in force since 6 April 1959, frame the extension. Article 1 ties cover to claims made against the insured because third parties have died, been injured or had their health impaired, or because their property has suffered loss or damage. The policy protects the insured against unfounded and excessive claims as well as justified ones.

The decisive limit begins here. Article 3 of the same conditions excludes claims made by persons bound to the insured by a contract of service or agency. A worker on the site is therefore not a third party, and an accident at work is not met by this cover.

The workforce has its own policy. Article 1 of the Employer's Liability Insurance General Conditions covers the employer's legal liability for accidents at work towards workers bound by a contract of service and subject to the social insurance legislation, or their dependants, together with recourse actions brought by the social security institution. The gap between third party and employee is the one most often discovered after a loss; our liability insurance page sets out the range.

What Needs a Supplementary Agreement?

Article A.3 lists items that are not automatically covered but can be brought in by supplementary agreement, within the limits stated in the policy. On site this list is where two quotations genuinely differ.

• Construction plant and equipment used to carry out the works
• Temporary site huts, ancillary structures, site facilities, tools and equipment
• Debris removal costs, provided the loss itself is covered
• Express transport costs other than by air, and overtime payments
• The insured's legal liability for losses suffered by third parties
• Strike, lockout, riot and civil commotion
• The maintenance period starting after completion or provisional acceptance
• Acts of terrorism and resulting sabotage, and environmental pollution losses

What Stays Outside the Cover?

Article A.4 lists the exclusions. Some are the general exclusions found in any policy; others go to the nature of construction itself and are the ones most often misread at quotation stage.

The distinction gets fine here. Loss caused by defective material or faulty workmanship is excluded, but loss or damage occurring in other insured property that is sound and correctly built is covered. The same logic applies to mechanical or electrical breakdown of plant: the failed item is out, the damage it causes to other insured property is in.

• Wear, tear, rust and decay, and inventory shortages
• Physical loss or damage to insured property arising from an error of plan, design or calculation
• The loss itself caused by defective material or faulty workmanship
• The loss itself caused by mechanical or electrical breakdown of construction plant
• Parts completed, provisionally accepted or handed over to the employer
• Aircraft, land vehicles and waterborne craft connected with the works
• Cash, securities, invoices, trade books, and construction and installation plans and drawings
• Consequential loss such as loss of profit or aesthetic defect from delay, stoppage, termination or penalty clauses
• Wilful acts of the insured or its responsible representative, and gross negligence where so agreed

How Are the Sum Insured and Claims Handled?

Article A.2 sets the measure: the sum insured shown in the policy should equal the final project value to be reached on completion, including any customs duties, taxes, charges, transport and labour costs. For tendered works it may not fall below the contract price as updated with the current year prices.

Tracking that figure is the policyholder's duty as the project grows. Where the values making up the sum insured increase, the policyholder must notify the insurer in writing within five days of learning of the increase and before any loss occurs. If the sum insured falls short, Article A.6 applies and the insurer is liable only in the proportion that the sum insured bears to the insurable value.

Claims run to fixed periods too. The insured must notify the insurer within five days of learning of a loss, take salvage and protection measures, and supply the information and documents needed to establish the cause and amount. Minor repairs may be carried out without waiting for the insurer's staff, provided a repair notice is given. If the insurer does not send its loss adjuster within seven days of the notification, the insured may start repairing the damaged part.

Where We Come In as an Agency

RYL Sigorta Aracılık Hizmetleri Limited Şirketi is an insurance agency. Our work is to read the insurance clause in the contract and tender documents against the general conditions, to list plainly what depends on a supplementary agreement, and to prepare quotations from the insurance companies we act for. The policy is issued by the insurance company, and any claim payment is made by it.

To have the cover structure of a current or upcoming project reviewed, reach us through the quotation form.

Frequently Asked Questions

Sources

• Construction Insurance General Conditions (All Risks) — SEDDK
• Law No. 4735 on Public Procurement Contracts
• Third Party Liability Insurance General Conditions — SEDDK
• Employer's Liability Insurance General Conditions — SEDDK

This article is for information only; the scope of cover is set by the policy’s specific and general terms.