Renovation isn't just about hiring contractors — you may be inheriting their insurance liability too
Opening a shop, fitting out an office, renovating a restaurant — plenty of owners save on management fees by hiring a few trusted tradespeople directly and dividing up the work: one contractor for partitions, an electrician for wiring, someone else for flooring and paint. On the surface this saves money, but it quietly creates two coverage blind spots:
- Who is liable if a contractor's worker gets hurt? — if you're not outsourcing the whole job to a single main contractor, you may already be a "principal contractor" in the eyes of the law
- Who covers property damage or third-party injury during the works themselves? — your shop's existing Public Liability policy very likely excludes incidents arising during renovation works
Both issues depend on how you structure the job. Better to sort this out before you sign off on a contractor than to discover the gap after something goes wrong.
You may already be a "principal contractor" under the Employees' Compensation Ordinance
Under Section 24 of the Employees' Compensation Ordinance (Cap. 282), when an employee of a sub-contractor is injured at work, the principal contractor is liable for the compensation claim — even though the sub-contractor is the direct employer. The principal contractor may later recover that payment from the sub-contractor, but that right of recovery doesn't change one thing: the injured worker can come after you first, without having to chase the sub-contractor.
Statutory minimum insured amounts and penalties — the official figures
Per the Labour Department's concise guide to the Employees' Compensation Ordinance, the statutory minimum insurance cover is:
| Number of employees | Minimum insurance cover per event |
|---|---|
| Not more than 200 | Not less than HK$100 million |
| More than 200 | Not less than HK$200 million |
One thing to note in particular: where you take on construction work as a principal contractor (renovation counts as construction work), you may take out a policy for not less than HK$200 million per event, covering both your own liability and that of your sub-contractor(s) under the Ordinance and at common law. The principal contractor and sub-contractor(s) should clearly define this liability split in writing.
An employer who fails to secure the required insurance is liable to prosecution and, upon conviction, to a maximum fine of HK$100,000 and imprisonment for two years.
What CAR/EAR insurance covers — and why it isn't Public Liability
Even once the worker-liability question is sorted, there's another layer most owners haven't thought through: physical damage and third-party injury arising from the renovation itself isn't automatically covered by the Public Liability policy your shop already carries for day-to-day trading.
A Public Liability policy generally covers accidents during "normal trading" — a customer slipping in-store, a shelf falling on someone. Renovation and construction work is treated as elevated risk, and many policies explicitly exclude it. That's where Contractors' All Risks (CAR) / Erection All Risks (EAR) insurance comes in:
| Coverage | What it covers | Who should buy it |
|---|---|---|
| Employees' Compensation Insurance | Contractors' / renovation workers' injuries on the job — legally mandatory | The contractor (direct employer); principal contractor joint liability |
| CAR insurance | Physical damage to works-in-progress (materials, partitions, fittings), plus third-party bodily injury / property damage liability arising from the works | Whoever is responsible for the renovation — the contractor, or the shop owner buying it to protect themselves |
| Public Liability Insurance | Third-party accidents during normal trading (often excludes the renovation period) | The shop owner / operator |
These three cover different phases and different parties — having one doesn't mean the other two are covered. Confirm before the works start whether the contractor or you are buying each of them.
What malls and landlords typically require
Many mall management offices or landlords write their own clauses into the tenancy agreement or fit-out handbook, requiring contractors to produce original copies of their CAR policy and Employees' Compensation policy before work can start. This is a contractual requirement, not a statutory one — but in practice, no policy usually means no access to the site. Confirm the specific requirements with management or the landlord before work begins, rather than getting shut down mid-renovation.
What owners can do before renovating
- Choose a main contractor that already holds adequate insurance — rather than hiring separate tradespeople yourself, outsourcing the whole job to one main contractor with both Employees' Compensation and CAR cover makes the liability split much cleaner
- Ask to see the original policy, not just a verbal assurance — verify the insured amount and confirm the policy period covers the full renovation timeline
- Consider buying your own CAR cover — if the contractor's coverage may not be adequate, the shop owner can take out CAR insurance independently, protecting against gaps in the contractor's own policy
- Switch back to your normal Property All Risks and Public Liability cover once renovation is complete — CAR/EAR insurance is designed for the works period only; you need to revert to standard trading cover once the fit-out is done