Based on the contents of the government decree on construction works in effect since 1 October 2024, all domestic construction or design firms and self-employed persons must have compulsory contractors' liability insurance starting from 15 January 2025.
Contractors are obliged to take out liability insurance to cover damages, including personal injury and damage to property, and the associated costs, caused in the course of the construction work they undertake. The liability insurance shall cover, inter alia, persons employed by the insured contractor and persons having other employment or service relationships with the insured contractor, as well as subcontractors.
The government decree sets the coverage of the insurance, i.e. the upper limit of the amount to be paid by the insurer in the event of damage, based on the net turnover of the company or self-employed person in the last closed financial year. The lowest tier of the insurance is below HUF 100 million yearly net turnover (ca. EUR 240,000), with further tiers between HUF 100 and 500 million, HUF 500 million and 2 billion, HUF 2 billion and 10 billion HUF and the final tier above HUF 10 billion. Most contractors in the domestic construction industry are in the lowest tier, meaning that the decree obliges them to take out insurance with a maximum coverage of HUF 20 million (ca. EUR 48,000 euros) per claim and HUF 40 million (ca. EUR 96,000) as total for one year.
Contractors must notify the Hungarian Chamber of Commerce and Industry (MKIK) by submitting a copy of the policy within 8 days of concluding a liability insurance contract. MKIK is responsible for verifying compliance at least once annually. Failure to secure insurance will prevent contractors from receiving construction site handovers, opening electronic construction logbooks, or commencing construction activities.
In cases of non-compliance, MKIK may initially suspend the contractor’s professional activities. If the issue is not resolved within the grace period, the contractor will be removed from the official registry. Liability insurance requirements do not apply retroactively to contracts or construction activities initiated before 1 October 2024. However, for contracts signed or projects commenced after this date, contractors must obtain liability insurance. Additionally, the policy number or a declaration of compliance must be included in the construction contract.
By Denes Glavatity, Attorney-at-Law, KCG Partners Law Firm
