Contractors' All Risks (CAR) & Erection All Risks (EAR) Insurance Malaysia
Section I Material Damage and Section II Third-Party Liability
Malaysian civil construction and plant installation tenders—whether awarded by private developers, GLCs, or public works departments (JKR)—mandate joint-names Contractors' All Risks (CAR) or Erection All Risks (EAR) placement prior to site possession. CAR policies govern civil and structural building contracts, whereas EAR policies govern the installation, testing, and commissioning of heavy industrial machinery, power turbines, and manufacturing lines. Both wordings split protection into two core sections: Section I indemnifies physical loss or damage to the permanent contract works, temporary works, and materials stored on-site; Section II indemnifies legal liability for accidental bodily injury or property damage caused to surrounding third parties.
Total Section I Sum Insured = Original Contract Value + Principal-Supplied Free Issue Materials + Professional Fees + Debris Removal
Construction period and Defects Liability (Maintenance) Period
Unlike annual renewable policies, CAR and EAR policies are underwritten for the specific duration of the construction or erection schedule plus an ensuing Maintenance / Defects Liability Period (typically 12 to 24 months). Under the Extended Maintenance Cover endorsement, the insurer covers physical damage to the contract works caused by the contractor while executing remedial defects work on-site during the maintenance phase, as well as damage originating from a cause occurring during the construction period before the Certificate of Practical Completion (CPC) was issued.
Coverage & Technical Matrix
| Coverage Component / Parameter | Status / Basis | Underwriting Notes |
|---|---|---|
| Section I: Contract Works & Materials | Covered (Full Contract Value) | Covers fire, flood, storm, collapse, subsidence, and accidental physical damage on-site |
| Section II: Third-Party Liability (TPL) | Covered (Configurable Limit) | Includes Cross Liability and Vibration, Removal or Weakening of Support extensions |
| Extended Maintenance (Defects Liability) | Included (12 to 24 Months) | Covers losses occurring during defect rectification after Practical Completion |
| Principal's Existing & Surrounding Property | Optional Endorsement | Essential for renovation, fit-out, and factory extension contracts |
Standard Policy Exclusions
- Cost of rectifying defective design, defective plan, defective specification, or faulty workmanship itself (subject to DE3 / DE4 / LEG2 wording levels)
- Mechanical or electrical breakdown of construction plant and mobile cranes unless endorsed under a Contractors' Plant & Machinery (CPM) schedule
- Liquidated and Ascertained Damages (LAD) or financial penalties for late project handover
- Consequential loss, loss of profit, or damage occurring after the Principal takes over a completed section without insurer continuation endorsement
Underwriting & Quotation Requirements
- Copy of the Letter of Award (LOA) or Bill of Quantities (BQ) showing full contract sum and work breakdown
- Gantt chart / Master Work Programme specifying commencement date, completion date, and Maintenance Period duration
- Site layout plan, soil investigation (SI) report (for deep basement excavation, piling, or slope works), and adjacent building proximity details
- Full names and SSM registration numbers of the Principal (Employer), Main Contractor, and Subcontractors to be named as Joint Insureds
Frequently Asked Technical Questions
Why must both the Project Owner (Principal) and Main Contractor be named on a CAR policy?
Naming the Principal, Main Contractor, and all Subcontractors as Joint Insureds—paired with the Cross Liability Clause—ensures that each party is protected as if a separate policy had been issued to each, preventing the insurer from pursuing subrogation against a subcontractor for accidental site damage.
What happens if rain delays or supply chain bottlenecks push our completion date past the CAR policy expiry?
You must notify our underwriting desk before the original construction period expires to arrange a Construction Period Extension Endorsement. Allowing the construction period to lapse into the Maintenance Period prematurely leaves ongoing active construction works uninsured.
Key Underwriting Clauses Defined
Cross Liability Clause
An endorsement in joint-names Commercial General Liability and Contractors' All Risks policies where the insurer treats each named insured as a separate entity for third-party liability claims.