Risk & Business Magazine Jones DesLauriers Insurance Magazine Summer 2018 | Page 6

BUILDER’S RISK POLICY Don’t Overlook The Details Of Your Builder’s Risk Policy T he expression “the devil is in the details” applies to construction insurance. The things that are sometimes overlooked are what can come back to bite you if you aren’t careful. Most construction policies, otherwise known as builder’s risk policies, contain warranties. These are guidelines which policy owners must follow; otherwise, they risk either having their coverage voided or suffering a financial penalty. To illustrate this, let’s take a look at a site security warranty. It requires a policy holder to ensure a security guard is on the construction site anytime it isn’t operational, such as at night or on weekends. If there is a loss—such as a flood, theft, or fire—and these requirements haven’t been followed, your coverage could be void. The insurer could reserve the right to not cover your claim or you could receive a financial penalty and a discounted settlement. It’s important that you’re aware of what your construction insurance policy warranties stipulate. It’s extremely important to follow them to the letter, because insurance companies can hold up your claim if it appears that you haven’t. Warranties are necessary because, in a lot of cases, these construction projects wouldn’t be insurable without them. Take 6 Matt Croswell has over 15 years of experience in the commercial insurance industry, specializing in Construction Risk. Working alongside the firm’s Industry Leaders and Business Specialists, he is responsible for the firm’s Residential Construction practice. His experience includes underwriting construction risks at one of Canada’s premier insurance companies. BY: MATT CROSWELL PARTNER, ACCOUNT EXECUTIVE Matt earned his Bachelor’s Degree in Economics at the University of North Carolina at Chapel Hill. He also completed his Chartered Insurance Professional (CIP) designation. for example a high-valued wood-frame construction project, such as a larger stacked-townhome project. Most insurers would not want to take on the risk of insuring such a project if the contractor doesn’t adhere to certain guidelines, such as obtaining off-hours site-security or ensuring the proper disposal of refuse from the site. Knowing that a construction site is being operated within certain risk-mitigating guidelines allows insurance companies to feel more comfortable with the potential risk which, in turn, also makes it more affordable to insure. Another example is a “hot works” warranty which requires plumbers to remain on the job site for a specific amount of time after using soldering equipment or blowtorches to ensure the area doesn’t catch fire. These requirements can change construction schedules and add to budget costs. If you’ve budgeted $100,000 for your insurance premium, but the policy requires that you have off-hours security, you have to add this expense to your project’s risk prevention costs. I advise my clients to make sure their subcontractors sign off on their adherence to the warranties too, because they’re liable if the subcontractors don’t also adhere to the warrantee requirements. Aside from being liable, nobody wants a claim. It’s important to speak with your broker if you have any questions or concerns about the wording of warranties. As an example, the wording of fencing warranties can sometimes prove complicated when it comes to active job sites. It can be impossible to keep a site completely enclosed at all times if you’ve got trucks, equipment, materials, and people constantly moving in and out of the job site, and yet that’s what the wording of the warranty says is required. So either sign off on the differences or change the wording. It is important to understand these kinds of details and work with your broker and insurer to find a way to work around the wording of warranties so they fit with your project’s goals and plans while also ensuring you are in adherence with insurer requirements. To learn more, reach out to Matt at [email protected]. +