This case study is an anonymised composite based on publicly reported commercial insurance claim patterns. It is not actual Apex client data and does not constitute legal or insurance advice. Names, locations and identifying details have been changed. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.
A regional main contractor based in the South West with around 80 directly employed staff, turnover £42m. Work mix is roughly 60% new-build commercial (industrial, light commercial, retail), 30% refurbishment and 10% public sector. Most contracts are placed under the JCT Standard Building Contract or Design and Build forms, with occasional NEC4 work on public projects. The firm carries combined liability cover and a separately placed annual contractors’ all risks (CAR) policy with a £10m project limit on a per-contract basis.
The firm undertook the construction of a £6.8m business park on a brownfield site in Wiltshire under JCT Design and Build 2016 with bespoke amendments. The project commenced in March and was scheduled for completion the following May. In October, during the structural phase, a significant flood event caused by an unprecedented storm overwhelmed the site’s temporary drainage and surface-water management. Approximately 600mm of standing water accumulated across the partially completed ground-floor slab area over a forty-eight-hour period before the site team was able to pump it down. The water saturated the recently poured ground-bearing slab in places, damaged stored materials including approximately 60 tonnes of structural insulation, undermined recently completed earthworks on the perimeter, and ingressed the partially erected steel frame causing surface corrosion on connection plates.
The firm’s project manager notified the broker on the Tuesday following the weekend storm. Two parallel issues emerged. First, the loss itself — what was the reinstatement cost and how would the contract works (CAR) policy respond? Second, the contractual position — under the JCT contract, the firm carried the risk of damage to the works prior to practical completion under the “Specified Perils” allocation, and the question was whether the loss was reinstateable at the firm’s cost or whether it could be passed up the chain through delay-and-disruption claims to the employer.
The employer’s project manager, working under the contract’s design and build provisions, took the position that the firm carried the loss in its entirety and that the contract’s extension-of-time provisions did not assist on this particular event because the storm was not formally classified as a “Relevant Event” under clause 2.26 in the bespoke amendments (which had narrowed the standard JCT wording).
The reinstatement cost across the various damaged elements totalled approximately £1.4m: slab investigation and remediation £420,000, replacement insulation and materials £180,000, earthworks remediation £240,000, structural steel cleaning and re-coating £160,000, delay-related preliminary costs over a ten-week programme extension £320,000, and consequential professional fees £80,000.
The CAR policy responded on the physical damage elements — the slab, the materials, the earthworks and the steelwork — subject to a £25,000 each-and-every-loss excess and the policy’s flood definition. The delay-related preliminary costs were the contested area. The CAR policy did not contain a “delay in start-up” or “advance loss of profits” extension; the firm’s view had been that this cover was for the employer to procure, not the contractor.
The contractual claim against the employer for extension of time and loss-and-expense was pursued in parallel through the JCT contract’s adjudication provisions under the Housing Grants, Construction and Regeneration Act 1996.
The CAR policy responded substantially as expected on the physical damage elements. Settlement was reached at approximately £960,000 after the loss adjuster’s site assessment and a robust negotiation over the slab remediation methodology — the firm proposed full replacement of the affected slab area, the loss adjuster initially proposed partial cut-and-fill, and the eventual agreement was on full replacement with a contribution from the firm towards betterment.
The coverage gap on the delay-related preliminary costs was unresolved. The firm carried this loss directly to its profit-and-loss account for the financial year. The adjudication against the employer recovered approximately £140,000 of the £320,000 preliminary cost on the basis that the storm event triggered the contract’s force majeure provisions notwithstanding the narrowed Relevant Event wording, but the balance remained with the firm.
A further coverage point emerged at year-end. The firm’s combined liability policy had a contractual liability extension that responded to liabilities assumed under contract, but the policy excluded liabilities arising from a contractor’s own delay where there was no third-party loss involved. The delay preliminary costs therefore fell outside the combined liability response as well.
The total uninsured loss to the firm was approximately £180,000 after all insurance and contract recoveries — a substantial but survivable hit on a £42m turnover business.
The firm completed the project five months late and was paid in full subject to a small liquidated damages deduction of £80,000 for the unrecovered delay period. The CAR policy renewed with a 22% rate increase, an enlarged £50,000 each-and-every-loss excess for flood-related claims, and a condition precedent on temporary works for surface-water management. The firm reviewed its CAR cover with the new broker and added a “delay in start-up” extension on subsequent contracts where the bespoke amendments to the standard JCT form narrowed the firm’s ability to recover delay-related costs from the employer.
The firm also amended its tender risk allowance for projects with bespoke JCT amendments, recognising that the standard CAR market product is designed around the standard contract risk allocation and that any narrowing of the standard contract requires either a contract amendment back to the standard position or a corresponding insurance extension.
The intersection between construction contracts and construction insurance is one of the most common sources of unexpected loss in the sector. First, the standard JCT and NEC contract suites allocate risk in a way that is broadly aligned to the standard CAR market product; bespoke amendments narrow that alignment and create coverage gaps that the firm has to either accept, decline to contract on those terms, or insure separately. Second, “delay in start-up” or “advance loss of profits” cover is conventionally for the employer to procure on the contract, but contractors should check the contract works cover language for any delay-related extensions and should consider stand-alone cover where the contract risk allocation pushes delay risk onto the contractor. Third, the Housing Grants, Construction and Regeneration Act 1996 adjudication route is a quicker and cheaper way to resolve contract claims than litigation, but the contractual interpretation question still has to be argued on its merits. Fourth, the CAR policy’s flood definition and excess should be reviewed annually against the project portfolio — brownfield, low-lying or storm-exposed sites attract increased excesses and conditions. Fifth, the firm’s combined liability policy contractual liability extension is narrower than many contractors assume; legal review of the wording against typical project contracts is justified expenditure.
We would have reviewed the firm’s CAR cover against the JCT amendments on individual projects at the project award stage, not at the annual policy renewal — the question of whether a specific contract carries unusual risk allocation has to be answered project by project, and the right time to procure additional cover is before the contract is signed, not after the storm. We would also have reviewed the combined liability contractual liability extension against the firm’s typical contract portfolio. At notification, we would have coordinated the CAR claim response alongside the adjudication preparation, ensuring that the insurer’s loss adjuster’s findings were aligned with the firm’s contractual case against the employer.
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