Builders Risk Insurance
The builders risk insurance Canada contractors buy is usually written under a different name. In this country the standard term is course of construction insurance, and your CCDC contract calls it “broad form” property insurance, benchmarked to IBC Forms 4042 and 4047. Whatever the label, it is the first-party policy that pays to repair or rebuild a project while it is being built, no matter who caused the damage.
Stanhope Simpson places course of construction cover for contractors, developers and owners across Atlantic Canada. Just as importantly, we read the terms that decide whether a claim is actually paid: the limit basis, the defects clause, the deductible schedule, and the three triggers that quietly end the policy before the building is finished.
What Is Builders Risk Insurance in Canada?
Course of construction is an “all risks” first-party property policy on work in progress. It responds to sudden and accidental physical loss or damage to the project itself and to the materials that will form part of it, regardless of fault.
Its defining feature is that it is written in joint names. Owner, general contractor and subtrades are all insured, and the insurer waives its right of subrogation among them. The Supreme Court of Canada set that principle out in Commonwealth Construction v. Imperial Oil (1977): everyone on site shares an insurable interest, so they are spared the need to fight each other after a loss. Canadian courts have continued to read the insured group broadly, most recently extending it to a component supplier in Fluid Hose & Coupling v. Allianz (2025 ONSC 2517).
- The building or structure under construction, renovation or expansion
- Materials and supplies on site that will form part of the finished work
- Temporary structures: scaffolding, formwork, falsework, hoarding
- Foundations, below-grade work and site services
- Debris removal following an insured loss
- Materials in transit and in off-site storage, by extension
- Testing and commissioning, by extension
- Soft costs, expediting expenses and professional fees, by extension
Note the last three carefully. Property in transit, property in off-site storage, and testing and commissioning are not in the base form. CCDC’s own guide to construction insurance is explicit that no coverage is provided for property in transit or off site and that the coverage is readily available as an extension. If you pre-fabricate off site or stage modules at a yard, this has to be endorsed and the location declared.
Contract Requirements
Builders Risk Insurance Canada: What CCDC 41 Requires
CCDC 41 – Insurance Requirements was updated on 14 December 2020, its first change since 2008. GC 11.1.1 of CCDC 2 imports whichever edition is in force at bid closing, so a project let on the older form still picks up the newer limits.
The Limit Is Not the Contract Price
Section 5 of CCDC 41 requires a limit of not less than 1.1 times the Contract Price, plus the full stated value of Products and design services the Owner is supplying for incorporation into the Work. Insuring to bare contract price under-insures against your own contract.
Deductible Capped at $10,000
CCDC 41 (2020) caps the property deductible at $10,000, up from $5,000 in the 2008 edition. The Owner may agree to a higher deductible where the Contractor demonstrates financial capability. Coverage must be no less than IBC Forms 4042 and 4047.
It Is GC 11.1.1.4, Not GC 11.2
A widely repeated error. In CCDC 2 (2008), GC 11.2 is Contract Security — bonding. Broad form property insurance sits at GC 11.1.1.4, and boiler and machinery at GC 11.1.1.5. In CCDC 2 (2020) the contract security clause was removed and the insurance period was re-linked to Ready-for-Takeover.
Why Canadian Contractors Need It
Your CCDC Contract Requires It
Under CCDC 2, GC 11.1.1 makes the Contractor responsible for providing, maintaining and paying for the broad form property insurance unless supplementary conditions move it to the Owner. It is a contractual obligation, not an option.
Nothing Else Covers the Project Itself
Your CGL and wrap-up liability answer third-party claims. Damage to the building you are constructing is a first-party property loss and belongs here. A wrap-up will not rebuild a burned structure.
Lenders and Owners Insist On It
Construction financing is rarely advanced without evidence of course of construction cover naming the lender. On renovations, the Owner also has to declare the existing structure, which the policy does not automatically insure.
One Loss Can End a Project
A fire, an overnight water escape through an open envelope or a wind event on a partially enclosed structure can exceed the profit on the entire job. This is the policy that keeps the schedule and the balance sheet intact.
What Course of Construction Cover Delivers
All Risks, Not Named Perils
The base form responds to sudden and accidental physical loss or damage from any cause not specifically excluded, rather than to a short list of named perils.
Everyone on Site Is Insured
Owner, contractor and subtrades are insured under one policy, with subrogation waived among them. That is what stops a loss turning into litigation between the parties who have to finish the job together.
Built Around the Project
Term, limit, deductible schedule, defects clause and extensions are set for the specific build. Terms are commonly written for 3, 6, 9 or 12 months and extended as the schedule moves.
Extensions That Match the Real Exposure
Soft costs, delay in start-up, transit and off-site storage, testing and commissioning, flood and earthquake can all be added by endorsement where the project needs them.
Read the Wording, Not the Certificate
Covered, Endorsed, or Excluded
A certificate of insurance will not tell you which of these applies to your project. Only the policy wording will.
In the Base Form
- The permanent works under construction
- Materials on site for the finished work
- Temporary structures and falsework
- Foundations and below-grade work
- Debris removal after an insured loss
Available by Endorsement
- Property in transit and off-site storage
- Testing and commissioning, including hot testing
- Soft costs: consultant fees, permits, loan interest
- Delay in start-up / advance loss of profits
- Expediting expenses and professional fees
- Flood and earthquake
- Permission to occupy / partial occupancy
Excluded
- Your own tools, mobile equipment and vehicles
- Mechanical and electrical breakdown in normal use
- Wear, tear and gradual deterioration
- Delay, loss of use and liquidated damages
- Third-party bodily injury and property damage
- The existing building on a renovation
- Faulty workmanship itself, subject to carve-backs
The renovation trap. Course of construction insures the work being built, not the building you are working in. In Dominion of Canada General Insurance v. Viking Fire Protection (2019 NLCA 13), sprinkler water damaged surrounding areas of a hospital during a renovation. The court held the policy insured only property that would enter into and form part of the completed project. The existing hospital was not insured. Damage to existing property is a liability exposure, not a course of construction one, and both policies are needed.
The Clause That Decides the Claim
LEG 1, LEG 2 and LEG 3 Defects Clauses
Every course of construction policy carries a defects exclusion drawn from the London Engineering Group wordings. Which one is attached decides how much of a defect-related loss you actually recover.
LEG 1 / 96
Outright defects exclusion. Excludes all loss or damage caused by defective workmanship, materials or design, including the resulting damage. The broadest exclusion and the worst outcome for a contractor.
LEG 2 / 96
Consequences exclusion. Excludes only what it would have cost to rectify the defect immediately before the damage occurred. Resulting damage is covered. Fine when the defect is caught early; punishing when it is discovered late and would have been expensive to fix in place.
LEG 3 / 06
Improvement exclusion. Excludes only the cost of improving on the original design, material or workmanship. The narrowest exclusion and the best cover. On projects where remediating a latent defect in place would be costly, LEG 3 is often worth well more than the premium difference.
In Ledcor Construction v. Northbridge Indemnity (2016 SCC 37) the Supreme Court held that faulty workmanship exclusions are read narrowly to exclude only the cost of redoing the faulty work itself, not the cost of repairing the damage that work caused. The scratched curtain wall on an Edmonton tower was resulting damage and was covered. Insurers have tightened defects wordings since, which is why the specific LEG clause on your policy now matters more than the general position at law. Canadian treatment of LEG 2 remains unsettled following Acciona Infrastructure v. Allianz (2014 BCSC 1568).
The Five-Tier Alternative
DE1 to DE5 Design Exclusion Clauses
Where the London Engineering Group gives you three levels, the DE wordings give you five. DE stands for Defects Exclusion and is just as often written Design Exclusion. Dated 1995 and standard on Contractors All Risks and Erection All Risks forms, DE clauses appear on Canadian projects that are led, reinsured or fronted out of the London and international markets. The job is the same as LEG: deciding how much of a defect-related loss you actually recover.
DE 1
Outright defects exclusion. Excludes loss or damage to the insured property due to defective design, plan, specification, materials or workmanship — the defect and everything it goes on to damage. The DE equivalent of LEG 1/96, and the same bad outcome. Rarely seen outside basic or distressed placements.
DE 2
Extended defective condition exclusion. Excludes the property in defective condition, anything relying on it for support, and the cost of getting at it. Non-defective property damaged as a consequence is still covered. The widest of the defective-condition exclusions and the one to negotiate down.
DE 3
Limited defective condition exclusion. Excludes the property in defective condition and the access costs to reach it, but covers other insured property that is free of defect and is damaged by the defect. The common market baseline, and broadly where LEG 2/96 lands — though the two calculate the exclusion very differently.
DE 4
Defective part exclusion. Narrows DE 3 to the individual component or item that is defective, rather than the whole defective condition. Resulting damage to sound parts is covered. In practice DE 3 and DE 4 often settle at the same number; the wording bites when the defect is spread across an assembly.
DE 5
Design improvement exclusion. Covers the defective property and the resulting damage, and excludes only the extra cost of improving on the original design, plan, specification, workmanship or materials. The DE equivalent of LEG 3/06 and the best cover on the ladder. Worth paying for on any unproven design or difficult in-place remediation.
Read across the two families and DE 1 lines up with LEG 1/96, DE 3 and DE 4 sit in LEG 2/96 territory, and DE 5 lines up with LEG 3/06. DE 2 has no LEG counterpart at all. Roughly equivalent is not identical: on a real loss, the recovery under a DE clause and its supposed LEG twin can differ materially.
Most Canadian course of construction policies attach a LEG clause. A DE wording on your certificate is a signal that the risk sits on a CAR or EAR form, or that a reinsurer’s wording is driving the placement.
Ledcor Construction v. Northbridge Indemnity (2016 SCC 37) narrows faulty workmanship exclusions as a matter of Canadian law. The specific clause attached to your builders risk insurance Canada placement is still what drives the settlement. Confirm which family you have before you assume the level of cover, and treat DE 1 or DE 2 as a reason to shop the market.
When Cover Ends
Three Triggers That End the Policy Early
Most contractors assume the policy runs to final completion. Under CCDC it does not. Coverage ends at the earliest of three events, and two of them routinely catch Canadian projects out.
Ten Days After Ready-for-Takeover
Ready-for-Takeover is more than substantial performance: under GC 12.1.1 it also requires final cleaning, operations manuals, as-built drawings, start-up testing and provision of access. The ten-day window exists so the Owner can bind permanent property insurance. If nobody owns that handover, the finished building sits uninsured.
Use or Occupancy Begins
Occupancy outside the permitted uses terminates the policy rather than merely reducing it. The permitted carve-outs are construction purposes, habitational, office, banking, a convenience store under 465 m², parking, and installation or testing of equipment. Early tenant move-in needs a written permission to occupy endorsement first.
Thirty Days Unattended
If the work is unattended or construction ceases for 30 or more consecutive calendar days, cover ends. Winter shutdowns, financing pauses, permit delays and trade disputes all push Canadian sites past this line. Insurers often also require documented site inspections at set intervals during any inactive period.
Builders Risk Insurance FAQ
Is it called builders risk or course of construction in Canada?
Both describe the same policy. Course of construction is the standard Canadian term and builders risk is the American one. Your CCDC contract will call it “broad form” property insurance, benchmarked to IBC Forms 4042 and 4047. You may also see Contractors All Risks (CAR) or Erection All Risks (EAR) on internationally placed programs.
Does CCDC 2 require me to buy it?
Yes, by default. GC 11.1.1 makes the Contractor responsible to provide, maintain and pay for the listed coverages, which include the broad form property insurance at GC 11.1.1.4. It only moves to the Owner if supplementary conditions say so. Note it is not GC 11.2 — that clause was contract security in the 2008 edition and was removed in 2020.
How much coverage does CCDC 41 require?
Not less than 1.1 times the Contract Price, plus the full stated value of Products and design services the Owner is supplying for incorporation into the Work, with a deductible not exceeding $10,000. That is section 5 of CCDC 41 as published on 14 December 2020.
When does my course of construction policy actually end?
At the earliest of three events: ten calendar days after Ready-for-Takeover; the start of use or occupancy outside the permitted uses; or the site being unattended or work stopping for 30 or more consecutive calendar days. Most contractors assume it runs to final completion. It does not.
The owner wants to move tenants in early. What should I do?
Call your broker before anyone occupies. Occupancy outside the permitted uses terminates the policy rather than reducing it. You need a written permission to occupy or partial occupancy endorsement, or a confirmed handover to the Owner’s permanent property policy. This is one of the most common ways a Canadian project ends up uninsured without realising it.
Are my tools and equipment covered?
No. Contractors’ own tools, mobile equipment and vehicles are excluded from course of construction. You need a separate contractors’ equipment floater, which CCDC 41 requires at section 7 as a distinct coverage.
Is material in transit or in off-site storage covered?
Not in the base form. CCDC’s guide to construction insurance is explicit that no coverage is provided for property in transit or off site, and that it is readily available as an extension. If you pre-fabricate off site or stage modules at a yard, this must be endorsed and the location declared.
If a subtrade’s bad work damages finished work, is that covered?
Generally yes for the resulting damage. In Ledcor Construction v. Northbridge Indemnity (2016 SCC 37) the Supreme Court held that faulty workmanship exclusions are read narrowly to exclude only the cost of redoing the faulty work itself, not the cost of repairing the damage it caused. The specific LEG clause attached to your policy still governs how much you recover.
What is a LEG clause and why does it matter?
It is the defects exclusion on your policy. LEG 1 excludes all defect-related loss. LEG 2 excludes only what it would have cost to fix the defect immediately before the damage. LEG 3 excludes only improvement or betterment. On a project where remediating a latent defect in place would be expensive, LEG 3 is usually worth paying for, because under LEG 2 that notional rectification cost comes off your claim.
What is the difference between LEG clauses and DE clauses?
Same job, different family. LEG is the London Engineering Group set and has three levels: LEG 1, LEG 2 and LEG 3. DE is the Defects Exclusion set, also written Design Exclusion, and has five: DE 1 through DE 5. DE wordings are standard on Contractors All Risks and Erection All Risks forms and turn up in Canada when a project is led, fronted or reinsured out of the London or international market.
Reading across, DE 1 matches LEG 1, DE 3 and DE 4 sit in LEG 2 territory, DE 5 matches LEG 3, and DE 2 has no LEG counterpart at all. The families are close but not interchangeable, and the recovery on a real loss can differ. Check which clause is attached to your builders risk insurance before you assume how much of a defect loss you would get back.
Does it cover my losses if a fire delays the project?
Not under the base form. Delay, loss of use and liquidated damages are excluded. You need Delay in Start-Up or Advance Loss of Profits cover, which responds to lost net profit, fixed expenses and debt service. It typically carries a waiting period measured in weeks rather than a dollar deductible, and it only triggers where insured physical damage caused the delay, not a strike or a late delivery.
What happens if the project runs late?
Nothing automatic. Policies are written for a fixed term tied to the expected completion date, commonly three, six, nine or twelve months. Extensions must be arranged before expiry, because a lapse cannot be fixed retroactively. Material delays should be reported to the insurer as a change in risk, and extension premium is normally payable.
Does it cover the existing building on a renovation?
No, unless it is specifically arranged. Course of construction insures the work that will form part of the completed project. In Dominion of Canada General Insurance v. Viking Fire Protection (2019 NLCA 13) the existing hospital was held not to be insured under the builders risk policy covering the renovation. On renovation work the Owner needs to declare the existing structure and the parties need both property and liability cover in place.
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