Insurance (CCDC 41) and bonding

Insurance and bonds both appear in GC 11 of CCDC 2-2020, and owners often file them together. They do different jobs. Insurance pays for accidents: a fire, an injury, a crane on a car. A surety bond pays when the contractor fails: it stops performing, or it stops paying its trades. This lesson covers the CCDC 41 insurance requirements, the CCDC 221 performance bond and CCDC 222 labour and material payment bond, the owner's duties as trustee of a payment bond, and the bonds Ontario makes mandatory on public contracts.

Learning outcomes

• Read the CCDC 41 (2020) insurance requirements and size the broad form property (builder's risk) limit for Northgate.
• Explain how a performance bond and a labour and material payment bond work, and what changed in the 2024 CCDC bond forms.
• Describe the owner's duty as trustee of a labour and material payment bond after the Supreme Court's decision in Valard.
• Decide when section 85.1 of Ontario's Construction Act requires bonds, and how the prescribed Forms 31 and 32 differ from CCDC forms.

The lesson

Insurance and surety are different products

An insurance policy is a two-party promise: the insurer pays covered losses in exchange for a premium, and expects some losses across its book. A surety bond is a three-party guarantee. The surety guarantees the contractor's (the principal's) obligations to the owner (the obligee), and expects to be repaid by the contractor for anything it pays. A surety underwrites the contractor's capacity and finances in the way a lender would; a bond is credit, not insurance.

CCDC 41: the insurance requirements

CCDC 41, CCDC Insurance Requirements, sits outside the construction contract and is incorporated into it. CCDC 2 GC 11.1 requires the contractor to provide, maintain and pay for insurance with the coverages and minimums set out in CCDC 41, and CCDC 5B, 14 and 17 reference it too. The current edition was released on December 14, 2020, alongside CCDC 2-2020. It sets eight requirements:

1. Commercial general liability: at least $10,000,000 per occurrence, with a $10,000,000 aggregate for completed operations, and a deductible of no more than $10,000. Aon's summary says it is kept in force to one year after Ready-for-Takeover, with completed operations cover for six years after it.
2. Automobile liability: $10,000,000 per occurrence for owned or leased vehicles.
3. Manned aircraft and watercraft liability, where used in the Work: $10,000,000 per occurrence.
4. Unmanned aerial vehicle (drone) liability: $5,000,000 per occurrence, or more if the law requires. New in 2020.
5. Broad form property (builder's risk): at least 1.1 times the Contract Price plus the full value of owner-supplied Products and design services, with a deductible of no more than $10,000.
6. Boiler and machinery: at least the replacement value of boilers, pressure vessels and other insurable objects in the Work, including hot testing and commissioning.
7. Contractor's equipment: "all risks" cover for construction equipment, which the owner may waive if the contractor proves it can self-insure.
8. Contractor's pollution liability: $5,000,000 per occurrence. New in 2020.

The owner may accept higher deductibles on liability and property cover if the contractor shows the financial capacity to carry them. Changes to the requirements, such as an owner-arranged wrap-up liability or builder's risk program, belong in the Supplementary Conditions, which lesson 10 covered.

View the data

Coverage	CCDC 41 (2008)	CCDC 41 (2020)
Commercial general liability	$5,000,000	$10,000,000
Automobile liability	$5,000,000	$10,000,000
Manned aircraft and watercraft	$5,000,000	$10,000,000
Unmanned aerial vehicle	Not required	$5,000,000
Contractor's pollution liability	Not required	$5,000,000

Performance and payment bonds

CCDC 2 does not require bonds by default. GC 11.2, Contract Security, applies when the Contract Documents call for them, and owners then specify the forms and amounts. CCDC publishes three: CCDC 220 bid bond, CCDC 221 performance bond and CCDC 222 labour and material payment bond. The 2002 versions were replaced in 2024; CCDC's introduction of the 2024 forms highlights Ready-for-Takeover and mitigation work among the changes. Bonds at 50% of the Contract Price each are common in Canadian practice, and the amount is the owner's choice on a private project.

A performance bond protects the owner. If the contractor defaults and the owner declares that default properly, the surety can remedy it, arrange completion or pay the cost to complete, up to the bond amount. An owner can weaken its own claim by paying out the contract balance, failing to give notice, or changing the contract in a big way without telling the surety. A labour and material payment bond protects the people the contractor fails to pay. They are not parties to the bond; the owner is obligee as trustee for them. Claimants must give written notice within strict periods. In the bond at issue in Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, the period was 120 days.

Valard matters to owners. An unpaid subcontractor learned of the bond about seven months after its notice period expired and sued the obligee. The Supreme Court of Canada held that the obligee, as trustee, had a duty in the circumstances to tell potential claimants that the bond existed, and found for the subcontractor. The practical lesson: an owner that requires a payment bond should make its existence known, for example by posting a notice at the site and naming it in the tender and subcontract documents.

Ontario: mandatory bonds on public contracts

Section 85.1 of the Construction Act makes bonds compulsory for "public contracts": those where the owner is the Crown, a municipality or a broader public sector organization, with a contract price of $500,000 or more. The contractor must provide both a performance bond and a labour and material payment bond, each covering at least 50% of the contract price, in the prescribed forms: Form 32 for performance and Form 31 for payment. The rule does not apply where the procurement began before July 1, 2018, or where the contractor is an architect or engineer. On alternative financing (P3) projects it applies to the construction contract below the project company, at 50% up to a $100 million contract price and a $50 million cap above it.

Form 32 is not CCDC 221 with a new number. It is about 12 pages, with set claim and response forms and timelines: a surety acknowledges an owner's demand within four business days and gives a full response within twenty. It excludes liquidated, consequential and delay damages unless agreed, makes the owner's agreement to pay the contract balance to the surety a condition of claiming, caps the surety's overall liability, and lets the owner do Necessary Interim Work and Mitigation Work while the surety investigates. Form 31 extends claimant status to sub-subcontractors. Since January 1, 2026, lower-tier claimants can recover under a payment bond without first preserving a lien.

Northgate worked example

Northgate Logistics Inc. (fictional) is a private owner, so section 85.1 does not apply to Northgate Distribution Centre (fictional). Insurance follows CCDC 41 through GC 11.1 of the CCDC 2-2020 contract with Halvorsen Builders Ltd. (fictional). See the Northgate fact sheet.

Builder's risk limit. CCDC 41 requires broad form property cover of at least 1.1 × $34,950,000 = $38,445,000, plus the full value of any owner-supplied Products and design services. The owner's racking is installed under its own separate contract from M10, after takeover; the owner's broker should confirm how that work and the owner's contractor are insured, because Halvorsen's policy is built around Halvorsen's Work.

Liability dates. Using Aon's summary, Halvorsen's general liability must stay in force to one year after Ready-for-Takeover, Sunday January 14, 2029 if M9 holds, and completed operations cover runs to Saturday January 14, 2034. The owner's representative diarizes certificate renewals against those dates.

Bonds, hypothetically. The fact sheet does not say whether the owner's Supplementary Conditions require bonds. If they required CCDC 221-2024 and 222-2024 bonds at 50% each, each bond would be $17,475,000, delivered before mobilization at M3 on Monday March 1, 2027. And if Northgate had been a public project, for example a municipal works depot, section 85.1 would require Form 32 and Form 31 bonds of at least the same amounts.

View the data

Item	Basis	Amount
Contract Price	Northgate fact sheet	$34,950,000
Broad form property minimum	1.1 × Contract Price (plus owner-supplied Products and design services)	$38,445,000
Performance bond (hypothetical)	50% of Contract Price	$17,475,000
Labour and material payment bond (hypothetical)	50% of Contract Price	$17,475,000
Commercial general liability	CCDC 41 minimum per occurrence	$10,000,000

Owner's move

• Have your broker read CCDC 41 against the project. Decide in the Supplementary Conditions whether you want higher limits, an owner-arranged wrap-up or builder's risk, or extra cover such as professional liability for any delegated design.
• Collect certificates before mobilization, then track them. No certificates and bonds, no site access. Diarize renewals through the completed operations period.
• Make the payment bond known. After Valard, post a notice at the site and name the bond in tender and subcontract documents.
• Protect your performance bond claim. Hold the contract balance, give the notices the bond requires, and call the surety early when default looks likely.
• Use the right form. CCDC 221-2024 and 222-2024 on private work; prescribed Forms 32 and 31 on Ontario public contracts.

Common mistakes

1. Treating a bond as insurance. A surety expects to be repaid by the contractor and will test every condition of the bond.
2. Paying out the contract balance after default. The surety relies on that balance to complete the work.
3. Keeping the payment bond a secret. The owner, as trustee, can be liable to claimants who never learned of it.
4. Accepting an expired or mismatched certificate. Check limits, deductibles, named insureds and dates against CCDC 41.
5. Using a CCDC bond on an Ontario public contract. Section 85.1 requires the prescribed forms.

Quick quiz

1. What is the CCDC 41 (2020) minimum general liability limit per occurrence?

   1. $2,000,000
   2. $5,000,000
   3. $10,000,000
   4. $20,000,000

2. What is Northgate's minimum broad form property limit, before owner-supplied Products and design services?

   1. $34,950,000
   2. $38,000,000
   3. $38,445,000
   4. $41,940,000

3. Who does a labour and material payment bond protect?

   1. The contractor
   2. Unpaid subcontractors and suppliers
   3. The surety
   4. The owner's lender

4. A municipality signs a $600,000 contract after a tender issued in 2026. What bonds does s. 85.1 require?

   1. None
   2. A performance bond only
   3. Form 32 and Form 31 bonds, each at least 50%
   4. CCDC 221 and 222 at 100%

5. What did the Supreme Court decide in Valard?

   1. Sureties must pay late claims
   2. The obligee, as trustee, could owe a duty to tell potential claimants about the bond
   3. Payment bonds are void without registration
   4. Subcontractors can sue the surety without notice

Show answers and explanations

1. C. The 2020 edition raised general liability from $5,000,000 to $10,000,000.
2. C. 1.1 × $34,950,000 = $38,445,000.
3. B. The owner is obligee, but holds the bond as trustee for unpaid claimants.
4. C. A public owner, a price of $500,000 or more and procurement after July 1, 2018 trigger both prescribed bonds.
5. B. The obligee-trustee had a duty in the circumstances to disclose the bond, and the claimant succeeded.

Key terms

CCDC 41

The CCDC Insurance Requirements document incorporated into CCDC contracts; current edition December 14, 2020.

Broad form property (builder's risk)

Insurance on the Work itself during construction against physical loss or damage.

Completed operations

Liability cover for injury or damage arising from finished work after it is handed over.

Surety

The company that guarantees the contractor's obligations under a bond and seeks repayment from the contractor.

Performance bond

A bond that protects the owner against the contractor's failure to perform the contract.

Labour and material payment bond

A bond that protects unpaid subcontractors and suppliers, held by the owner as trustee.

Public contract (s. 85.1)

In Ontario, a contract where the owner is the Crown, a municipality or a broader public sector organization.

References

1. CCDC, CCDC 41 CCDC Insurance Requirements (December 14, 2020), as published by RCABC.
2. Aon, CCDC 2 and CCDC 41 whitepaper.
3. Cowan Insurance Group, CCDC 2 (2020) stipulated price contract changes: is your construction insurance affected?
4. Speigel Nichols Fox LLP, Insurance coverage in CCDC contracts (May 2021).
5. Construction Canada, CCDC webinars: bond forms introduction (2024 bond forms).
6. McMillan LLP, Performance bonds: the new Form 32 under section 85.1 of the Ontario Construction Act (2019).
7. Ontario Bar Association, A bargain struck: surety bonds under Ontario's new Construction Act (October 2018).
8. Canadian Underwriter, Surety providers' argument rejected by Supreme Court of Canada (February 2018), on Valard Construction Ltd. v. Bird Construction Co.
9. Fasken, Ontario's amendments to the Construction Act take effect January 1, 2026 (December 2025).

Verified on November 6, 2026.

Next lesson in this trackPayment certification and progress draws (coming soon)