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By Dale Kaprosy

There’s a significant amount of risk involved in any construction project, so builders and contractors can’t be too careful when it comes to securing Builders Risk coverage for their projects.

Oswald’s Design & Construction team recently attended the 2024 AGC Surety and Risk Management Conference, along with 600 of the leading construction companies and risk advisors to our industry.  During the two days of sessions, the team learned the latest trends in insurance coverage – and arguments insurers are using to contest builders risk claims.

Consider the following important matters when placing your next builders risk policy or negotiating your Master Builders Risk Program.

Contract Terms and Coverages

Think about how coverage responsibility is addressed in your contract. The provisions within the American Institute of Architects (AIA) documents need to be expanded to provide clarity on covered matters. Include in the contract who will be held responsible regardless of the cause of the problem.

The following should be considered for all projects:

• Deductibles. Who is responsible for the policy deductible regardless of fault?
• Damage to existing structures when the project involves renovations and additions to existing structures.
• Delays in start-up costs. Lost income or expenses due to a construction delay from a covered cause of loss
• Construction defect extensions (LEG III). Property damage resulting from defects in design, materials or work. Capacity and underwriting has tightened due to stricter underwriting requirements.
• Water damage deductible. Increased deductibles apply to losses resulting from water intrusion.
• Protective safeguard requirements. Insurers are mandating fencing, cameras, water monitors, security guards and other protective measures as requirements of coverage.
• Property stored outside. Does the policy have exclusions for materials (insulation, exterior panels, etc.) stored in the open but not adequately protected?
• Tower cranes integrated with structure. How are the tower crane and mobilization costs covered? Cranes covered outside the builders risk policy can create gaps in coverage for project delay expenses and lost income.
• Builder’s Risk as a primary coverage/ Waivers of Subrogation. Owners and contractors should agree upfront on Builders Risk as the primary source of coverage for damages during construction.
• Temporary storage / Off-site fabrication. Understand the policy limits and requirements for scheduling lay down areas and off-site fabrication exposures.

Claims

Treat the cost of repairs like a new job – give it your undivided attention. Keep full and meticulous records of everything included in the loss on your construction project, such as when the repairs began, who is working on it, and all dedicated labor and materials.

Give timely notice of an accident and request claim advances. Provide cost codes for items included in your claim. Specifically identify project management, hard costs, soft costs, and lost profits or delay expenses to be included in your claim. Note if there will be a delay in completing the project that will cause the owner to lose profits.

Have people dedicated to overseeing the repair project and work closely with the owner to coordinate all aspects.

Carrier trends

Providing a full set of records and being organized and prepared in case of an accident will help your claim move forward. This is especially important as carriers are coming up with new reasons to deny claims.

Builders Risk carries and adjusters will dispute claims based on defective construction not triggering a physical loss under the premises that the property was never in a satisfactory state and should not be considered damaged. They’re also refusing to pay when a problem becomes visible after construction is complete, even if the damage occurred during construction.

Capacity is becoming more restricted, especially on large frame projects. This trend is causing builders and contractors to insure larger projects through multiple carriers, requiring coordination of coverage terms. It could lead to delays in claim payments.

The Design & Construction team at Oswald can help you get the coverage you need and plan ahead in case of an accident.

For more information, visit our Design and Construction Hub here or contact me below: