When building a new home, and sometimes even during a renovation, it’s essential to make sure that a Builder’s Risk/Course of Construction policy is in place. This policy provides coverage for the physical building while it’s under construction, from losses such as fire, vandalism, water damage and more. As a general contractor, you are responsible for the build and for the site, and as such, you could find yourself on the hook if you don’t arrange the Builder’s Risk policy yourself. Some of the pitfalls you might encounter if you don’t arrange the policy include:
If you are working for a homeowner, they might say that they will purchase the policy and then forget to follow through or decide to save money and not purchase the policy or even let the policy expire before the project is complete. The general contractor is often considered to be responsible for all aspects of the project and as a result, you could find yourself paying for an uninsured loss due to the fact that you failed to purchase insurance for the project.
As the general contractor, you should always be a Named Insured on the Builder’s Risk policy in order to protect yourself. If you aren’t listed on the policy, you could be sued for a loss that occurs to the property and then not have a responding policy in place. This type of loss would not be covered under your Commercial General Liability policy as the house under construction would be deemed to be under your ‘care, custody and control’, which is an exclusion under a general liability policy. If you arrange the policy, you can ensure that your name is listed on the policy and that you will be protected under that policy in the event of a loss.
If there is a claim under the Builder’s Risk policy, say for example that a partially finished house caught on fire and burnt to the ground, you will want to be able to communicate with the claims adjustor and deal with both the repairs and the balance of the project. If you are not named on the policy, you would have no right to discuss the claim with the adjustor and they could even hire a different contractor for the repairs.
These are some broad examples of why a general contractor should arrange the Builder’s Risk policy. Our Bullfrog Insurance brokers are here to help if you have questions or want to discuss this policy coverage in further detail.