January 22, 2014

Construction insurance programs are like snowflakes: no two are exactly alike. Depending on the property you’re building, there are many different elements contractors needs to consider when building their insurance plan.

Most insurance companies create unique plans for each project, analyzing what could go awry and then choosing coverage that matches those risks. While one party (the contractor or owner) might be the one buying the insurance, they need to make sure it covers everyone involved: The subcontractors, the owner and, of course, the general contractor themselves. Builders risk policies cover the building, but it’s common for many different parties to be partial owners of the building throughout the construction process.

When creating the builders risk policy, all of the stakeholders should be covered is to prevent the insurer from recovering (also known as subrogating) any losses caused by one party’s negligence. The party that purchases the insurance should see to it that the policy includes a waiver of subrogation provision. This waiver is available in standard AIA forms and you can read more about it at Construction Law Viewpoint (http://www.constructionlawviewpoint.com/6/post/2012/10/-court-holds-aia-standard-form-waiver-of-subrogation-clause-applies-to-negligence-indemnity-and-breach-of-contract-claims-by-property-insurer-against-roofing-subcontractor-responsible-for-fire-loss.html).  The form essentially allows each party to waive its right to recover against the other as long as the damage is covered by the policy.

When written correctly, builders risk policies can insure all parties throughout the construction of a building. Make sure you write the policy so that it covers more than just the building itself. You’ll also want to cover temporary items like the scaffolding, fencing, construction trailers, and landscaping.

With the right construction insurance plan, builders can keep both their workers and their assets risk-free.  A good insurer will help build one that includes all the necessary elements, like general liability and workman’s comp, but most importantly, will give you the right builders risk policy.