All posts in Construction

Builder’s Risk Coverage


        Builder’s Risk Coverage: Understanding the Policy Period

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Builder’s Risk coverage is a type of property insurance specifically designed to cover property during the course of construction, including renovation and repair. Why do you need it? There are additional risks and responsibilities inherent in this type of work that a typical property policy is not designed to cover. For example, if someone steals contractors’ equipment from the job site or if construction materials are damaged, you could be liable for the loss if you do not have builder’s risk coverage.

Typically the coverage is purchased by either the property owner or contractor.

Regardless who purchases the coverage, all parties that have property involved in the project should be named in the policy. This may include the owner, contractor, subcontractors, the financial institution funding the project, and, in some cases, the architects and engineers. Once the project is completed and/or accepted by the owner, your regular property policy kicks in.

Since builder’s risk coverage only deals with the property, it does not include coverage for worksite injuries or design/construction defects. For any mishaps that occur on the job, you should rely on liability and workers’ compensation insurance policies for coverage.

Construction projects, regardless of their size, can present complex insurance issues. Are you confused about your exposures and policy options? If so, it’s no surprise—there are no standard builder’s risk policy forms covering these types of risks. To help you limit your exposure, here are some helpful builder’s risk policy basics.

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Policy Period: Commencement of Coverage


        Builder’s Risk Coverage: Understanding the Policy Period

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Commencement of Coverage: Builder’s Risk policies provide coverage for property in the course of construction, renovation or repair. But at what point does construction renovation or repair begin?

     • Typically, contracts require that insurance be provided for the duration of the
     contract period. This means that the policy inception date would be
     the date the contracts are signed.

     • The lender may also specify the inception date.

     • However, be sure to review insurance policy provisions to determine whether
     there are restrictions on when coverage begins. Policies may contain clauses
     that state coverage begins when construction commences or that the
     insurance company will pay for losses at the time you become legally
     responsible for the covered property, either on or after the effective date. Prior to
     any site preparation, demolition, or delivery of materials or equipment, review the
     policy to ensure there are no restrictions on coverage inception.

Construction projects, regardless of their size, can present complex insurance issues. Are you confused about your exposures and policy options? If so, it’s no surprise—there are no standard builder’s risk policy forms covering these types of risks. To help you limit your exposure, here are some helpful builder’s risk policy basics.

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Policy Period: Coverage Expiration


        Builder’s Risk Coverage: Understanding the Policy Period

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Coverage Expiration: Determining when coverage terminates can be equally problematic. Builder’s Risk policies can contain provisions that terminate coverage prior to policy expiration. The provisions typically state that coverage will end at the earliest of the following:

     • The policy expires or is cancelled

     • The property is accepted by the purchaser

     • Your interest in the property ceases

     • You abandon the construction with no intention of completing it

     • Unless specified otherwise in writing:

          ◦ 90 days after construction is complete

          ◦ 60 days after construction is complete and building described in the declaration is:

               • Occupied in whole or in part

               • Put to its intended use

Construction projects, regardless of their size, can present complex insurance issues. Are you confused about your exposures and policy options? If so, it’s no surprise—there are no standard builder’s risk policy forms covering these types of risks. To help you limit your exposure, here are some helpful builder’s risk policy basics.

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Builder’s Risk Coverage Problems


        Builder’s Risk Coverage: Understanding the Policy Period

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     • There is no coverage under the policy if the building is occupied to any
     extent
, for over 60 days, without written consent of the insurance company.

     • The policy only provides coverage for up to 90 days after the completion
     of construction
. In the case where the building is completed only two days before
     policy expiration, there are only two days of coverage available. There are
     90 days of coverage available after completion only if there are at least 90 days
     remaining in the policy period.

     • Coverage issues can arise at the end of a project, after construction is
     complete and the structure is occupied, but a “punch list” and final completion
     work remains.

Construction projects, regardless of their size, can present complex insurance issues. Are you confused about your exposures and policy options? If so, it’s no surprise—there are no standard builder’s risk policy forms covering these types of risks. To help you limit your exposure, here are some helpful builder’s risk policy basics.

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Solutions to Builder’s Risk Coverage


        Builder’s Risk Coverage: Understanding the Policy Period

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     • Understand the insurance coverage obligations of the project documents
     and contracts to ensure the policy period, at a minimum, fulfills the requirements.

     • Understand the terms and conditions of the policy and what triggers the
     coverage to commence and cease.

     • When coverage ends make sure permanent coverage is in place so no gaps
     in coverage exist.

Careful planning is the foundation for a smooth construction project, which includes the right exposure coverages. Many businesses choose to transfer or accept risk through contracts, purchase orders and lease agreements. However, not all contracts or endorsements are created equal.

Construction projects, regardless of their size, can present complex insurance issues. Are you confused about your exposures and policy options? If so, it’s no surprise—there are no standard builder’s risk policy forms covering these types of risks. To help you limit your exposure, here are some helpful builder’s risk policy basics.

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Six Steps to Minimize Business Interruptions



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According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after a disaster. Implementing steps to prepare for and respond to disasters can help to reduce loss. In order to protect your business from unavoidable interruptions, it is recommended that you have a plan in place.

Having a plan in place serves the following purposes:

     • To protect employees and personnel

     • To prevent environmental contamination

     • To protect revenue, assets and information

     • To prevent loss and to contain loss that occurs

     • To protect your reputation

     • How to Minimize Business Interruptions


Here are six steps you can take to help minimize business interruptions:

     Step 1: Determine the Risk

     Step 2: Calculating the Cost of Interruptions

     Step 3: Understand Your Insurance Coverage

     Step 4: Implementing Steps for Prevention and Mitigation

     Step 5: Create a Crisis Communication Plan

     Step 6: Preparing an Emergency Plan


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Going Green: Green Standards


        Thinking About Going Green?

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If you plan to engage in a green building or renovation project, it is important that you are aware of federal green standards.

In the United States, the dominant standard is the Leadership in Energy and Environmental Design (LEED) rating, which is administered by the U.S. Green Building Council (USGBC). Commercial buildings that are LEED certified not only have lower operating costs and provide a healthier, safer environment for occupants, they also allow the owner to qualify for tax rebates, zoning allowances and other incentives. Because of the unique nature of the health care industry, the USGBC has created a special LEED rating system for health care buildings.

The interesting thing to note about LEED ratings is that contractors and builders have a large amount of latitude on how they reach the certification. LEED does not specify what kinds of technologies or green components must be used to reach each level, and aside from the established prerequisites, points need not be attained in certain combinations. That means two buildings with identical point totals and LEED status may use completely different strategies, techniques and technologies to attain unique green results. One may excel in innovation and the other may focus on sustainability, but they both could ultimately achieve the same status.

A growing trend in new construction and renovations is green building, in an effort to be more environmentally friendly and reduce energy costs. This goal makes sense in the health care industry, as health care facilities tend to use much more energy than the average commercial building.

However, transitioning to a green facility is easier said than done. Health care facilities have unique needs that often clash with green initiatives, such as their 24-hour operation, different lighting requirements in different rooms, large amounts of water usage and the variety of equipment that must be operated continually. However, there are ways to incorporate green features while still maintaining necessary health and safety standards in your facility. It is important that you educate yourself, so that you can make the best decision for your own organization regarding going green.


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Minimize Business Interruptions: Determine the Risk


        Six Steps to Minimize Business Interruptions

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Step 1:

When determining the potential risks for business interruptions, consider both environmental risks and human risks. Additionally, consider which risks are preventable and which are not.

Once the risks are identified, you can begin to understand all elements involved, such as the hazard itself, the assets at risk, vulnerability to the risk and the ultimate impact of the risk. In order to be best prepared, rank each risk according to the likelihood of occurrence and the severity of impact.

According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after a disaster. Implementing steps to prepare for and respond to disasters can help to reduce loss. In order to protect your business from unavoidable interruptions, it is recommended that you have a plan in place.

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Going Green: Choosing Your Contractor


        Thinking About Going Green?

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When choosing a contractor, you need to be sure the company has experience designing and building according to LEED health care standards. A common problem occurs when a contractor cannot deliver on the promised design, leaving the client with a building that does not meet LEED standards and does not impact energy usage to the degree expected.

Do research before choosing a company to build or renovate your facility. If a contractor is promising something that seems too good to be true, it might be. Check all references and compare several options before choosing.

A growing trend in new construction and renovations is green building, in an effort to be more environmentally friendly and reduce energy costs. This goal makes sense in the health care industry, as health care facilities tend to use much more energy than the average commercial building.

However, transitioning to a green facility is easier said than done. Health care facilities have unique needs that often clash with green initiatives, such as their 24-hour operation, different lighting requirements in different rooms, large amounts of water usage and the variety of equipment that must be operated continually. However, there are ways to incorporate green features while still maintaining necessary health and safety standards in your facility. It is important that you educate yourself, so that you can make the best decision for your own organization regarding going green.


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Minimize Business Interruptions: Calculating the Cost of Interruptions


        Six Steps to Minimize Business Interruptions

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Step 2:

After the risks have been ranked, analyze the impact of each risk. In calculating cost containment, the following should be considered:

     • Lost sales or income

     • Increased expenses

     • Regulatory fines or contractual penalties

     • Delay of business

According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after a disaster. Implementing steps to prepare for and respond to disasters can help to reduce loss. In order to protect your business from unavoidable interruptions, it is recommended that you have a plan in place.

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