Contractors All Risk (CAR)
A broad-form construction policy combining builders risk on the project with third-party liability for the contractor in a single contract.
What It Is
Contractors All Risk, often abbreviated CAR, is a combined construction insurance product that bundles two coverages into one policy. Section 1 is property coverage for the works under construction, similar to a US builders risk policy, insuring permanent and temporary works, materials on site, and often materials in transit. Section 2 is third-party liability for the contractor, covering bodily injury and property damage arising from construction operations.
CAR policies are most common on international projects, on jobs involving multiple contractors and subcontractors, and on engineered or infrastructure works. They are typically written on London market or international forms rather than ISO forms.
Limits are usually structured around the contract value plus a percentage for soft costs and removal of debris. Coverage is project specific and runs from inception through practical completion plus a maintenance or defects liability period.
Why It Matters for Brokers
US brokers placing international or large infrastructure projects must understand that domestic builders risk and CGL templates do not translate directly. CAR policy wordings differ on key issues: defects exclusions (LEG 1, LEG 2, LEG 3), maintenance period scope, and named insured structures across the owner, general contractor, and subcontractor tiers. Misunderstanding the LEG clause selection alone can leave a multi-million dollar repair claim uninsured. For US clients with overseas exposures or joint ventures, properly structured CAR coverage is critical.
Real-World Example
A US engineering firm joint ventures on a $180 million wastewater plant project in the Caribbean. The broker arranges a CAR policy with a $180 million project limit, $25 million Section 2 third-party liability, LEG 3 defects coverage, and a 24-month maintenance period. Mid-construction, a defective concrete pour requires $4.2 million in repairs. Because the policy was written on LEG 3 wording, the cost of redoing the defective work and consequential damage is covered, less the standard improvement deductible.
Common Mistakes
- 1Choosing LEG 1 or LEG 2 wording without explaining the defects coverage trade-offs to the insured, who often assumes all defects are covered.
- 2Failing to extend the policy through the maintenance period, leaving the contractor uninsured for warranty work after handover.
- 3Naming only the general contractor, omitting the owner and subcontractors, which leaves cross-liability exposures uncovered.
- 4Treating CAR as a substitute for a contractor's annual CGL, when it is project specific and does not cover other operations.
How brokerageaudit.com Handles This
Submission Intake captures CAR project specifications including LEG selection, maintenance period, and named insured structure. Policy Checker validates the bound CAR policy against the underlying construction contract to confirm limit, coinsurance, and named insured wording match before binding.