Builders Risk

What's on this Page

• Overview
  • Purpose
• County’s Coverage Through CSAC-EIA (as of 2016)
  • Covered & Excluded Property
  • Covered Parties
  • Rationale for Covering Interests of Owner, Contractor and Subcontractors on One Policy
  • Covered & Excluded Causes of Loss
• Commercial Builders Risk Coverage Available to Contractors
  • Non-standard coverage
  • Covered Property
  • Covered & Excluded Causes of Loss
  • Covered Interests
  • Builders Risk Slide Tutorial
  • Sample Builders Policy (Zurich Insurance)

Return to User Manual Table of Contents

Read next: Aircraft Liability Insurance

Overview

Purpose

• To insure owners and contractors against damage to structures in the course of construction.
• To cover property exposures that are unique to construction risk:
  • partially completed structures;
  • equipment, materials and supplies intended to become part of the completed structure;
  • equipment, materials and supplies stored at other locations or in transit;

County’s Coverage Through CSAC-EIA (as of 2016)

Covered & Excluded Property

• Automatic coverage for real property in course of construction on new or existing covered locations for projects not exceeding $100M;
• Excluded property
  • dams, piers, roads, bridges; wastewater treatment facilities; land; standing timber and growing crops;
  • contractors equipment;
  • property in course of construction commencing after Memorandum inception with full contract value in excess of $100,000,000, unless CSAC-EIA has given prior approval.

Back to top

Covered Parties

• County and County-related entities scheduled on endorsement U-1 of the Property MOC.
• Any party for whom the County or its scheduled entities is required to provide coverage.  Property of our contractors and subcontractors is covered because the construction project insurance requirements obligate us to provide coverage for the contractors and subcontractors of all tiers.  This could also include lenders.

Rationale for Covering Interests of Owner, Contractor and Subcontractors on One Policy

• Eliminates questions about which party owns what property during the course of construction.
• Eliminates litigation, subrogation and determination of negligence.
• Claims are handled more quickly if only one insurer is involved.

Back to top

Covered & Excluded Causes of Loss

• Covered causes of loss: all risk of direct physical loss or damage except as excluded.
• Specific builders risk exclusions
  • the non-compliance of or delay in completion of contract;
  • non-compliance with contract conditions;
  • the cost of making good, faulty or defective workmanship, material, construction or design.  (Damage resulting from the faulty or defective workmanship, material, construction or design is covered.)
• Earth movement
  • Definition: earthquake, landslide, or earth sinking, earth rising or shifting.
  • Locations covered only if specifically scheduled.
  • Deductible:  5% of total values per unit per occurrence, subject to a minimum of $100,000.
  • Unit: each of the following is a separate unit:
    • (1) each separate building or structure;
    • (2) contents of each separate building or structure;
    • (3) applicable time element coverage of each separate building or structure;
    • (4) property in each yard.
• Flood is covered
  • Flood definition: general condition of partial or complete inundation of normally dry land area from: overflow of inland or tidal water; unusual and rapid accumulation or run off of surface waters from any source; mudslide or mudflow, which is a river or flow of liquid mud caused by flooding.
  • Deductible for properties outside the 100 year flood zone: standard property deductible ($50K for us).
  • Deductible for properties within the 100 year flood zone: $500,000 minimum deductible if total insured values are between $500,000,000 and $1,000,000,000; $1,000,000 minimum deductible if total insured values exceed $1,000,000,000.
  • Deductible for damage to piers caused by flood and wavewash: $500,000 per occurrence.
  • Deductible for damage caused by “named storm”: 2% of total values per unit, subject to a minimum of $500,000.

Back to top

Commercial Builders Risk Coverage Available to Contractors

Non-standard coverage

• ISO publishes a Builders Risk form, but its coverage is limited and is seldom used.
• Most insurers write their own proprietary forms.  Coverage can differ from insurer to insurer.
• References to covered property and covered perils in this manual represent common approaches to Builders Risk in commercial insurance policies, but each policy must be reviewed to determine its scope of coverage.

Covered Property

• Property which has been installed, or is to be installed in any commercial structure;
• Paving, curbing, fences and outdoor fixtures;
• Foundations of buildings and foundations of structures in the course of construction;
• Scaffolding, construction forms and temporary structures at the construction site, usually subject to a sublimit;

Back to top

Covered & Excluded Causes of Loss

• Most cover all causes of loss except those that are excluded.
• Flood: typically excluded, but often available by endorsement.  The coverage might be subject to a sublimit and an increased deductible.
• Earth movement: typically excluded, but often available by endorsement.  The coverage might be subject to a sublimit and an increased deductible.

Covered Interests

• The entity that purchases the policy and is listed as the named insured. 
• Any other party that is also listed as a named insured or who is an insured by policy definition or by endorsement.  Most experts recommend that a single builders policy cover the owner, general contractor and all subcontractors.
• Lenders.

Builders Risk Slide Tutorial
(PDF: 831 kB)

Sample Builders Policy (Zurich Insurance)
(PDF: 190 kB)

Back to top