FIDIC reference
Clause 19 — Insurance
The project’s mandatory policies: works and equipment, third-party liability, personnel.
Applies in: Red BookYellow BookSilver Book
Clause 19 allocates insurance duties: the “insuring Party” (usually the Contractor) maintains insurance of the works and equipment for full reinstatement value, third-party liability cover and personnel insurance; Yellow/Silver add professional indemnity for design. Policy terms and insurers are agreed, and evidence must be produced within set periods. If the insuring Party fails to insure, the other Party may take out the cover and recover the premium. Insurance does not replace liability under Clause 17 — they are separate mechanisms.
Key points
- Works and equipment insured at full reinstatement value.
- Liability covers (third party, personnel) are mandatory.
- If uninsured, the other Party insures and recovers the premium.
- Insurance does not displace Clause 17 liability.
How this works in practice
Clause 19 insurance fails not at signature but at the moment of a claim — when it emerges that the deductible absorbs most of the loss, cover lapsed on issue of the Taking-Over Certificate, and the Employer was never added as a co-insured. The practical approach is simple: check not that a policy exists but that its parameters match the contract requirements — limits, deductibles, exclusions, the schedule of insured parties and the period of cover including the DNP. Do this once at the start and repeat it at every renewal.
Common traps
- Cover ends at taking over and does not extend through the DNP — damage during the defects period is uninsured.
- The Employer and subcontractors are not named as insured parties although the contract requires it.
- The deductible is set at a level where a typical project loss is not covered at all.
Versions: 1999 → 2017 → 2022
- 1999
Insurance sat in Clause 18.
- 2017
Moved to Clause 19; policy and timing requirements were detailed.
- 2022
No substantive change in the 2022 reprint.
Clause FAQ
Which FIDIC books use Sub-Clause 19?
The clause applies in Red Book, Yellow Book, Silver Book. Particular Conditions may change the standard risk allocation, so always check the project contract.
What happens if the Contractor fails to put the required insurance in place?
The contract normally lets the Employer effect the insurance itself and recover the cost from payments due to the Contractor. The heavier consequence is that if a loss occurs, the Contractor bears all of it, including the portion a policy would have met. That is why evidence of insurance in force is a standard condition of the first payment, and it is a condition worth meeting literally.
Does construction insurance cover design defects?
A standard CAR/EAR policy typically excludes the cost of putting right the defective design work itself, while it may cover resulting damage to other parts of the works — the extent depends on which defects clause was selected. Design risk under the Yellow and Silver Books needs separate professional indemnity cover, and that is precisely the policy that most often excludes fitness for purpose. The two policies have to be read together.
Related clauses
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Reference material, not legal advice. Always check your contract and the Particular Conditions.