JCT insurance options A, B and C explained: who insures what

Why the contract dictates the insurance

The JCT family of contracts does not leave project insurance to chance: the contract particulars require the parties to select an insurance option, and the chosen option becomes a contractual obligation. Get the insurance clauses wrong — or select an option nobody can actually comply with — and the contract is in breach from day one, with the risk allocation the parties thought they had quietly failing underneath them.

All three options require cover in joint names: employer and contractor are both insureds under the same policy. Because an insurer cannot subrogate against its own insured, joint names cover settles in advance who pays when fire, storm or flood damages the project — the policy does, and the loss stops there, even where one party’s negligence caused it. That is the machinery all three options share; they differ in who insures what.

Option A: contractor insures the works

Under Option A the contractor takes out and maintains an all risks policy for the full reinstatement value of the works, in joint names, until practical completion. This is the standard choice for new build on a clear site, and for most contractors it is delivered by their annual contractors all risks (CAR) programme rather than a project-specific placement. The things worth checking are practical: that the annual policy limit actually covers this project’s full reinstatement value plus fees and debris removal; that the joint names and sub-contractor recognition provisions match what the contract requires; and that cover runs to practical completion as defined, including any sectional completion or partial possession arrangements.

Option B: employer insures the works

Option B places the same all risks, joint names obligation on the employer instead. It is chosen where the employer wants control of the insurance — sophisticated developers with their own programmes, projects with unusual risk profiles, or situations where the contractor’s covers are thin. The trap is administrative: employers buy works insurance rarely, and an Option B selection made in the contract particulars without anyone actually placing the policy is a real and recurring failure. If Option B is selected, the employer’s broker should be instructed before the contract is executed, not after the first claim.

Option C: existing structures and the works

Option C applies where work is carried out in or to an existing building — extensions, refurbishments, fit-outs. It splits the insurance in two. The employer insures the existing structures and contents against specified perils (fire, lightning, explosion, storm, flood and the other listed perils — not all risks), in joint names with the contractor. The employer also insures the works themselves on an all risks basis, again in joint names.

The logic is that the party who owns the building is best placed to insure it; the effect is that the risk of the existing building being damaged during the project — including by the contractor’s own negligence, where an insured peril results — sits with the employer and its insurers, not the contractor. Contractors and their insurers rely on this heavily. Employers frequently do not realise they have agreed to it.

Where Option C goes wrong

Option C failures cluster in predictable places. The employer’s existing property insurer is never told: buildings policies commonly restrict or exclude cover while contractors are on site or the premises are altered, so the cover Option C assumes may not be in force, and it will rarely be in joint names without a specific endorsement. The employer is a tenant: a tenant employer often cannot insure the building at all — the landlord does — and cannot compel the landlord’s insurer to add the contractor as a joint insured or waive subrogation; the JCT anticipates this with amendments and alternative arrangements, but they must be negotiated, not assumed. Terrorism and non-negligent damage cover are forgotten. Or the parties select Option C but the works insurance obligation is left ambiguous between the employer’s and contractor’s programmes, so both assume the other has it.

Every one of these is solvable before contract execution and expensive after a loss. The sequence that works: identify the option before signature, put the contract’s insurance provisions in front of the relevant brokers — employer’s and contractor’s — and evidence the covers against the contractual requirements in writing.

How Apex approaches JCT insurance

We read the contract before we talk about policies: which option is selected, what the particulars require, what amendments have been made, and only then whether the existing programmes comply or a project placement is needed. For employers taking on Option C — especially tenants — the conversation with the building’s insurers is the first call we make, because it is the one that cannot be fixed retrospectively.

Frequently asked questions

Who insures the works under each JCT option?

Option A: the contractor insures the works, all risks, in joint names. Option B: the employer insures the works, all risks, in joint names. Option C: the employer insures the works all risks and also insures the existing structures and contents against specified perils, all in joint names with the contractor.

What does joint names actually achieve?

Both employer and contractor are insureds under the same policy, and an insurer cannot bring a subrogated recovery against its own insured. So when an insured peril damages the project, the policy pays and the loss stops there — there is no onward claim between the parties for that insured loss, even where negligence caused it.

Why is Option C a problem for tenants?

Option C assumes the employer can insure the existing building in joint names with the contractor. A tenant usually cannot — the landlord insures the building — and the landlord’s insurer is under no obligation to add the contractor or waive subrogation. Tenant employers need the position negotiated with the landlord and its insurers, and the contract amended to match, before work starts.

Does the contractor’s annual CAR policy automatically satisfy Option A?

Not automatically. The annual policy must be checked against the contract: limit adequate for this project’s full reinstatement value plus fees, joint names and sub-contractor provisions matching the contract, and cover running to practical completion as the contract defines it.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.