It's not delays or damages that are leading contractors to go bust... it's lack of liability cover. Andy Cook says reform of this troubled sector is vital

Last week, a small South-west contractor that specialises in laying pavements went bust. It wasn't because of lack of work or even a costly legal battle over delays and liquidated damages. Oh no. The reason it went bust was insurance. Or, to be more precise, the lack of it.

The contractor's broker could not find markets for the company's liability cover; rather than trade illegally the company went under. OK, so construction is one of the hardest sectors in which to place liability cover. Its safety record, especially when it comes to falls from heights, is not great and that's why roofers and scaffolders have been having plenty of trouble finding cover all year. But paving?

The news comes as yet another Lloyd's liability syndicate - Heritage - suspends writing new business, albeit for a short while. There is clearly a capacity crisis in the London Market and a restricted appetite among the composites for liability business.

It is now a matter of economic importance to UK plc that the liability market is given a boost. Market forces, it seems, are not enough to attract enough capacity in quickly enough - there are still more profitable lines to write.

So what can the government do to tackle the economic effects of a liability capacity shortage?

A review of what is and what isn't covered by employers' liability (EL) would be a good start, although unrealistic given the government's intransigence over terrorism cover. Another avenue is a review of how the personal injury claims market can be reformed. This would be timely with the Callery v Gray case due to reach its conclusion today. Whatever its outcome, the time is ripe for our industry to make a case for reform in an area of gravest concern