Public vs. private projects: insurance requirements and common contractual pitfalls

Introduction

For an SME involved in construction or technical services projects, understanding public versus private project insurance is a crucial governance and decision-making issue. Insurance requirements, whether stemming from public specifications or a private contract, determine not only your risk coverage but also your contractual and financial obligations. After reading this, you will be able to structure your coverage, identify common contractual pitfalls, and document the essential elements for making informed decisions and monitoring your insurance commitments.

1. Frameworks for public and private projects in Switzerland

1.1 Public projects: procurement rules and general obligations

Public procurement in Switzerland is governed by a specific law, the Federal Act on Public Procurement (PPA) , which entered into force on January 1, 2021, supplemented by the Ordinance on Public Procurement ( PPO ). This legislation aims to guarantee transparency, equal treatment, and effective competition in the awarding of public contracts (supplies, services, construction) by the Confederation, the cantons, and sometimes the municipalities.

From an insurance perspective, procurement law does not directly mandate specific insurance products but rather structures strict procedures and standard contractual conditions that insurers and companies must comply with to respond to calls for tenders. Public authorities often publish their own general terms and conditions and insurance requirements in the tender documents.

1.2 Private projects: contractual freedom and technical standards

Private projects remain subject to civil law and the Swiss Code of Obligations (specifically Articles 363 et seq. for construction contracts). The parties retain greater contractual freedom to define obligations, required insurance, and liabilities. The use of SIA (Swiss Society of Engineers and Architects) standards , such as SIA 118, is widespread for specifying obligations and technical clauses, even if they are not legally binding.

2. Insurance requirements according to context

2.1 Business liability insurance (RC)

In both contexts, civil liability insurance is essential: it covers third-party claims for bodily injury and property damage caused during the execution of the project. In Switzerland, business liability insurance is generally not legally mandatory but remains highly recommended coverage to protect against the costs of significant claims.

In public contracts, project owners often require insurance certificates and minimum guaranteed amounts adapted to the scale of the project, even if these minimums are not uniformly set by law.

2.2 All-risks construction insurance (TRC)

All Risks Construction (ARC) insurance covers damage to works, materials, and installations during execution. In many public projects, especially large-scale ones, the specifications require the project owner—or even, upon request, the contractor—to have ARC insurance in order to reduce capital losses in the event of unforeseen circumstances.

In private projects, TRC may be required by financial partners (banks, investors) or contractually agreed to protect the interests of the project owner.

2.3 Guarantees and bonds

In public procurement, it is common practice to require bid bonds, advance payment bonds, and performance bonds to secure the bidder's commitment. These guarantees can be provided by banks or insurance companies. They serve to protect the contracting authority against performance defects or site abandonment.

In private projects, performance or completion guarantees can be negotiated, but they do not benefit from the same level of standardization. Insurers offer suitable products to transfer these risks off-balance sheet, which can preserve cash flow.

2.4 Legal protection and other coverage

Furthermore, in public projects, authorities may request legal protection coverage to address contractual disputes. Specialized insurers offer tailored modules for administrative or commercial litigation.

In the private sector, legal protection is generally optional but relevant to anticipate the costs of litigation in the event of disagreement over the execution or interpretation of the contract.

3. Common contractual pitfalls to avoid

3.1 Underinsurance or inadequate coverage

A classic pitfall is to undersize the coverage amounts (for example in liability) in relation to the requirements of the specifications, especially in public contracts where the guarantees required can be high depending on the complexity of the project.

Pilot decision : build an assurance requirements grid based on tender documents for each project.

3.2 Ambiguity regarding responsibilities between parties

In complex (often private) contracts, the responsibilities between the project owner, general contractor and subcontractors are sometimes not clarified, which can create grey areas in the event of a claim.

Pilot decision : explicitly document and attach each party's insurance obligations to the main contract.

3.3 Omission of surety bonds

Failing to include security (offer, execution) can expose you to significant financial losses if the project is abandoned or poorly executed.

Pilot decision : systematize the analysis of surety needs during the project portfolio audit phase.

4. Guidelines and checklist

What needs to be documented

• Copies of insurance certificates (liability, all-risks, surety bond) with amounts and periods covered

• Insurance requirements extracted from the specifications (public) or the main contract

• Responsibilities clearly divided between parties

• Planned claims and dispute notification procedures

Summary table: typical insurance policies by project

Type of insurance | Public project (standard requirements) | Private project (standard requirements)

Business liability insurance | Certificate often required | Highly recommended

All-risk construction insurance (ARC) | Often required | Often negotiated

Guarantees/Securities | Offer and Performance Required | Negotiable depending on risk

Legal protection | Sometimes requested | Optional

5. Case studies

Case study 1: broad public tender

A small business submits a bid for a major public renovation project. The tender documents require company liability insurance with a minimum guaranteed amount and comprehensive construction all-risks insurance. In the absence of compliant certificates, the bid is rejected.

Methodological approach :

1. Extract and document all insurance requirements from the appeal file.

2. Check with your broker that current policies cover these amounts and conditions.

3. Obtain and archive the certificates before submission.

Case study 2: Complex private contract with subcontractors

For a private office renovation project, the main contract does not clearly define the insurance obligations of subcontractors. Damage caused by a subcontractor leaves a contractual gap.

Methodological approach :

1. Map the stakeholders and their insurance policies.

2. Add a minimum insurance condition clause for each subcontractor.

3. Plan for a procedure to periodically verify the certificates.

Common mistakes and how to avoid them

Mistake : relying on a single insurance category without checking exclusions.

Solution : Review the general terms and conditions of the policy with an expert.

Error : Failure to update insurance policies after contract modifications.

Solution : establish an annual review process or a review process before each contract signing.

Mistake : forgetting deposits in a public contract.

Solution : integrate a checklist step into your risk management.

Questions to ask your insurer/broker

1. Does my liability insurance policy cover the requirements of the public project I am targeting?

2. What guaranteed amounts are recommended for TRCs in my sector?

3. Does the TRC insurance cover damages after the work has been completed?

4. What types of guarantees (offer, performance, surety) can I obtain through insurance?

5. What specific exclusions apply to my current policies?

6. How to effectively document insurance certificates for external respondents?

7. What are the required deadlines for reporting a claim?

8. Does legal protection cover public/administrative disputes?

9. How do my insurance policies align with the contractual clauses stipulated by SIA or public authorities?

10. What mechanisms exist for adjusting premiums or coverage if requirements change during the course of the project?

Conclusion

To effectively manage a project, whether public or private, you need to understand insurance requirements, clearly document responsibilities, and anticipate contractual pitfalls. By structuring your insurance coverage and contracts, you reduce financial uncertainty and improve your decision-making capabilities. Next step : conduct a quick audit of the insurance contracts and policies for your ongoing projects to identify and address any potential gaps.