Insurance Clauses in FIDIC & EPC Contracts: Drafting Legally Sound Agreements in Bahrain
Large-scale construction and engineering projects in Bahrain from towers in Manama to industrial plants are often governed by FIDIC (International Federation of Consulting Engineers) and EPC (Engineering, Procurement & Construction) contracts. Both frameworks allocate risks between employers, contractors, and subcontractors, with insurance clauses playing a central role in protecting all parties against financial and legal exposure.
Poorly drafted or unclear insurance provisions can lead to costly disputes, project delays, and uncovered liabilities. That is why companies turn to an experienced lawyer in Bahrain or legal consultant Bahrain to ensure insurance clauses are precise, enforceable, and aligned with local laws.
Learn about your rights under Bahrain insurance regulations.
Why Insurance Clauses Are Crucial in FIDIC & EPC Contracts
Construction projects are inherently high-risk, involving potential property damage, worker injuries, third-party claims, and design defects. Insurance clauses in FIDIC and EPC contracts aim to:
- Allocate responsibility for specific risks (employer vs. contractor).
- Ensure adequate financial protection throughout the project lifecycle.
- Prevent overlapping or contradictory coverage between parties.
- Facilitate compliance with Bahraini insurance law and regulatory requirements.
Without strong clauses, disputes often arise when an incident occurs and insurers deny responsibility, leaving contractors or developers exposed.
Key Insurance Clauses in FIDIC Contracts
FIDIC contracts, widely used in Bahrain’s infrastructure projects, typically include:
- Contractor’s All Risk (CAR) Insurance – Covers damage to works, materials, and third-party claims.
- Employer’s Liability Insurance – Protects against workplace injuries and employee compensation claims.
- Professional Indemnity Insurance – Required for consultants and design engineers.
- Third-Party Liability Insurance – Covers claims from external parties affected by the project.
- Duration and Extension Provisions – Ensures coverage lasts until project completion and handover.
These clauses must be carefully reviewed and customized to align with Bahraini law and the project’s risk profile.
Key Insurance Clauses in EPC Contracts
EPC contracts, common in industrial and energy projects, often involve:
- Erection All Risk (EAR) Insurance – Protects during assembly and commissioning of equipment.
- Delay in Start-Up (DSU) Insurance – Covers financial losses if a project is delayed due to insured risks.
- Marine Cargo & Transit Insurance – For imported machinery and materials.
- Comprehensive Liability Insurance – To cover wide-ranging risks from construction to operation.
- Waivers of Subrogation – Prevent insurers from suing one party after compensating another.
Drafting these provisions requires detailed knowledge of engineering risks and Bahraini insurance law.
Common Legal Issues in Drafting Insurance Clauses
Construction and engineering companies often face:
- Ambiguity in coverage (unclear wording leading to disputes).
- Conflicting policies between contractors, subcontractors, and developers.
- Failure to align with Bahraini law or regulatory requirements.
- Excessive exclusions that weaken intended protections.
- Disputes over premium allocation between employer and contractor.
These pitfalls highlight the importance of working with a law firm Bahrain experienced in drafting construction agreements.
Consult the Best Law Firm in Bahrain for insurance-related cases.
Best Practices for Legally Sound Insurance Clauses
To avoid disputes, insurance provisions in FIDIC and EPC contracts should be:
- Clear and precise – Define coverage scope, duration, and beneficiaries.
- Compliant with Bahraini law – Align with civil, labour, and insurance regulations.
- Balanced – Allocate risks fairly between employer and contractor.
- Flexible – Account for project changes, delays, and extensions.
- Enforceable – Drafted in a way that courts and arbitral tribunals can uphold.
An experienced advocate Bahrain can ensure these principles are met.
Role of Lawyers in Insurance Drafting
A legal consultant Bahrain helps construction and engineering companies by:
- Reviewing FIDIC and EPC standard forms to identify gaps.
- Drafting customized insurance clauses tailored to project risks.
- Coordinating with insurers to confirm compliance with policy terms.
- Advising on dispute resolution mechanisms for insurance-related conflicts.
- Ensuring subcontractor agreements are consistent with main contract obligations.
This proactive approach prevents disputes and secures financial protection across all project participants.
Insurance clauses in FIDIC and EPC contracts are more than boilerplate provisions — they are essential safeguards against multimillion-dinar disputes in Bahrain’s construction and engineering sectors. By ensuring clauses are clear, compliant, and enforceable, companies can protect themselves from unforeseen risks and avoid project-stalling conflicts.
For developers, contractors, and subcontractors, seeking guidance from a qualified lawyer in Bahrain or law firm Bahrain ensures that insurance provisions are not just standard terms, but strategic tools for risk management.
