AAIS COVERAGE PERSPECTIVE
The many risks inherent in a construction project,
whether a large or moderate undertaking, require that
insurance coverage be selected with the utmost care.
Generally, the builders risk (or course of construction)
exposure may be insured under either a commercial
property or an inland marine policy. Forms and rates
associated with commercial property builders risk coverage
ordinarily are filed with state insurance regulators. Forms
and rates of inland marine builders risk policies, however,
are not subject to filing requirements and thus are
referred to as “nonfiled” forms. Insurers have more
flexibility in underwriting nonfiled classes because they
can create their own coverage provisions and rates, which
can be tailored to the particular risk exposure. The subject
of this article is the more preferred nonfiled inland marine
builders risk coverage, including the factors that must be
considered in properly writing this insurance.
Picture a typical construction project—perhaps a school,
an apartment building, or an office building—and consider
the parties involved in the planning and execution of the
project, the general layout of the site, the building materials
and construction equipment needed to complete the project,
and the work force required.
Builders risk insurance is designed to insure
construction projects, and it covers buildings and other
structures while being built, including building materials
and equipment intended to
become part of the building or
structure. Coverage applies to
property while at the job site, off
site in storage, and in transit.
(Coverage for construction
equipment, i.e., forklifts,
bulldozers, mobile tools, and so
on, would be provided by
contractors equipment
insurance.)
Typical parties to a
construction contract include:
• Project owner - party that
owns building or is having
building constructed
• Architect/engineers
• General
contractor/contractors/
subcontractors
• Lenders
• The construction contract
itself, while not a party, is a
crucial element