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builders risk

American Institute of Architects 2017 Insurance Requirements – An Introduction

In early 2017, the American Institute of Architects (“AIA”) introduced its 2017 updates to its form construction contract documents, including a new exhibit that addresses insurance requirements between the owner and contractor. As AIA forms are among the most popular and commonly used form documents in the construction industry,1 the forms are usually considered construction industry standards. Any company involved in construction as a project owner, architect, contractor or subcontractor should familiarize itself with the new AIA insurance terms and carefully consider the insurance coverage for any project it will undertake.2

Overview of the AIA Changes

It has been AIA’s practice to revise its family of contract documents every 10 years, with the last revision in 2007. While the 2017 changes go beyond insurance, possibly the most noteworthy change in 2017 is the launch of a separate exhibit for insurance. Entitled AIA Document A101™ – 2017 Exhibit A – Insurance and Bonds, this document is intended to be used in conjunction with AIA Document A201™ 2017 General Conditions of Construction – Article 11.3 The new exhibit does not replace Article 11; rather, the exhibit is intended to expand upon the insurance provisions of Article 11.Read More »American Institute of Architects 2017 Insurance Requirements – An Introduction

8 Key Considerations for a Builder’s Risk Policy ​​​​​​​​​​​​​​​

8 Key Considerations for a Builder's Risk Policy ​​​​​​​​​​​​​​​As owner of the new manufacturing facility building project, Thyme Manufacturing Co, Inc. has recently hired the project’s general contractor – Perkins Construction, Inc. In addition to developing the minimum insurance requirements to be used with Perkins Construction and its subcontractors, as Thyme’s newly appointed director of risk management, Jennifer is also responsible for arranging the insurance for the building during the course of its construction. This “course of construction” insurance is commonly known as builder’s risk insurance.

Thyme’s legal counsel has used the American Institute of Architects (AIA) construction contract documents with Perkins Construction – including the 2007 A201™ General Conditions of Construction.1 Of particular interest to Jennifer is Article 11.3 entitled “Property Insurance” – as this section will serve as Jennifer’s starting point to determine Thyme’sminimum builder’s risk insurance requirements.

Who Purchases Builder’s Risk?
Because of its market clout Perkins may be able to obtain the builder’s risk insurance for the benefit of Thyme at either a lower cost or with better coverage terms – charging any premium for the insurance back to Thyme. While the option of having the general contractor purchase the builder’s risk is permitted under the AIA A201™- 2007, Thyme opts to purchase the builder’s risk coverage itself. Thyme’s owner Justin concludes that Thyme should control the builder’s risk insurance because the new facility represents such a large investment by Thyme – Justin directs Jennifer to purchase builder’s risk insurance directly.

Read More »8 Key Considerations for a Builder’s Risk Policy ​​​​​​​​​​​​​​​

3 Exposures to Consider on a Builder’s Risk Policy

3 Exposures to Consider on a Builder's Risk PolicyHard, Soft and Business Income Expenses

The resurrecting construction industry means that builder’s risk submission activity is on the rise. As such, it’s important to understand this line of business. Here’s an overview of some things to consider on a builder’s risk policy.

Construction contracts generally require the building owner or the contractor to purchase and maintain a builder’s risk policy. The policy provides coverage for loss or damage to the unfinished building’s construction materials on the work site during the course of construction, subject to certain restrictions and exclusions. The policy can also be extended to cover existing structures if the project is a renovation. Exposures are broken down into three general parts: hard costs, soft costs and business income or loss of rents.

Hard costs are the tangible assets that comprise the construction project; quite simply, the costs of material and labor associated with a project – also known as “sticks and bricks.”

Soft costs, also known as Delay in Opening Expenses, are usually covered and limited by special endorsements to builder’s risk property policy. Coverage is provided for additional construction
loan interest, real estate taxes, marketing and re-leasing expenses, administrative expenses, and architectural/engineering fees which are incurred as a result of a covered loss – one that causes delay in completion of a project. These expenses can be further broken down into two sub-categories: construction expense and additional soft costs.Read More »3 Exposures to Consider on a Builder’s Risk Policy

Insurance During the Course of Construction

Construction FireThis morning, downtown Los Angeles is on a massive fire.

The apartment tower that was under construction is burnt down to ashes. Other buildings surrounding it are heavily damaged.
When the fire department is finished, who is going to pay for damages?

First, the damage to the building under construction worth at least the cost of all the materials that are now gone. These are tens of thousands of dollars that the building owner has lost, UNLESS he had Builders Risk Policy in place. Builders risk policy, which is sometimes called Course of Construction policy will pay for the cost of materials lost due to the fire.

Second, what about the neighbor buildings that are damaged too? What if there are people injured (hopefully not)? This is the liability of the apartment building owner which could be tens of thousands of dollar too, UNLESS he had Owners and Contractor’s Protective liability Policy. This is a liability policy which pays for property damage (buildings burnt, roads and street lights damaged) and bodily injury (people injured or dead) that results because of owner-builder’s liability during the construction.Read More »Insurance During the Course of Construction