17th Annual Willis Construction
Risk Management Conference
Builder’s Risk - Claim Adjustment
Challenges
Dave Passman, Senior V.P. – National Director
National Property Claims – Willis Group
Tom Vickers, Shareholder
Vanek, Vickers & Masini, P.C.
Builder’s Risk Insurance
AGENDA
• Builder’s Risk Insurance
• What it is, and what it is not.
• Pre-Loss Strategies
• Have a plan.
• Post-Loss Strategies
• Actively manage the process.
• Dealing with coverage issues.
• Dealing with quantum issues.
Builder’s Risk Insurance
SCOPE OF COVERAGE
Property insurance coverage for physical loss or damage to buildings
and structures during the course of construction, renovation or repair,
unless excluded by the policy language.
•All-risk v. named-peril.
•Physical loss or damage to covered property during policy period.
•This is property insurance, not liability or warranty.
•Hard costs v. soft costs.
Builder’s Risk Insurance
“Covered Property” defined as:
“buildings or structures … while in the course of
construction, installation, reconstruction, or repair.”
“Property Not Covered” defined as:
“existing buildings or structures to which improvements,
alterations, repairs, or additions are being made.”
Conflicting policy provisions can create ambiguity.
Builder’s Risk Insurance
PRE-LOSS STRATEGIES
Have a plan for what you will do in the event of a loss
- Identify person who will have ownership of the claim.
- Identify your team.
- Internal
- External (broker, forensic accountant, lawyer)
- Identify risks and what you will do to mitigate loss.
- Understand duties under the policy in the event of loss.
- Other.
Builder’s Risk Insurance
POST-LOSS STRATEGIES
- Provide notice.
- Calendar key dates.
- proof of loss; statute of limitations
- Execute your plan.
- Get the project back on track.
- Document and Communicate.
- with the adjuster, team members, and management
- Be prepared to devote substantial time to the process.
- requests for information and examination under oath
Builder’s Risk Insurance
COVERAGE ISSUES - coverage
Faulty Design, Workmanship, or Material Exclusion
“We will not pay for loss or damage caused by or resulting from: faulty, inadequate
or defective design, workmanship, repair, materials …”
1)
“… but if loss or damage by a Covered Cause of Loss results, we will pay for the
loss or damage caused by the Covered Cause of Loss.”
2)
“… however, any ensuing loss or damage is covered.”
Builder’s Risk Insurance
COVERAGE ISSUES – quantum
Advanced Loss of Profits and Loss of Rents Coverage
- delay in completion
- period of restoration and period of delay
- waiting period and deductible
Soft Costs Coverage
- delay in completion
Hard Costs Coverage
Builder’s Risk Insurance
HARD COSTS
• Cost to repair/replace damaged property
• Cost to clean-up debris
• Overhead and Profit
Builder’s Risk Insurance
SOFT COSTS
Additional Expenses over and above the projected
project cost as the result of:
1. An insured property loss.
2. Which delays the project beyond the projected
completion date.
Builder’s Risk Insurance
“BASIC” INSURED SOFT COSTS
• Interest on construction or repair loans
• Property taxes or assessments
• Advertising and Promotional Expenses
• Costs and Commissions for Lease Renegotiation
• Expenses to Reduce Loss – to extent successful
Builder’s Risk Insurance
OTHER COMMON INSURABLE SOFT COSTS
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Legal and Accounting Fees
Architect, Engineer, Consulting Fees
Insurance Premiums
Renegotiation of Financing
Closing Costs
License and Permit Extensions
Contractor or Developer Overhead Costs
Letters of Credit
Loss of Tax Credit
General conditions (may be specified)
Increased Cost of Construction from Delay
Access to Project Prohibited by Civil Authority
Other Appropriate to the Project
Builder’s Risk Insurance
GENERALLY EXCLUDED SOFT COSTS
• Penalties/Liquidated Damages
• Loss of Income
Builder’s Risk Insurance
SOFT COST CLAIM ISSUES
• Did an insured property loss occur?
• Did that loss result in a delay in
completion?
• Loss Quantum – What insured Soft
Costs were incurred?
Builder’s Risk Insurance
THE SOFT COST CLAIM ISSUE
“Did the insured property loss cause a
delay in completion?”
Builder’s Risk Insurance
QUESTIONS THE ADJUSTER WILL RAISE
1. What is the contract completion date?
2. What is the actual completion date?
3. What was the loss impact on the completion date?
4. Were there any other issues which impacted the
schedule?
5. Is the job on schedule? Really? Prove it!
Builder’s Risk Insurance
BEING PREPARED FOR THE SOFT COST CLAIM
1. Have a good project schedule/critical path.
2. Keep the schedule current, and accurate.
3. Consider the insured property loss repair methodology in context of
the project schedule.
4. Document “excluded losses” and how they impacted the schedule.
5. Maintain good records of schedule monitoring.
6. Assume the adjuster will have experts audit the schedule.
7. Calculation of delay - # occurrences and deductible issue.
Builder’s Risk Insurance
QUESTIONS?