Building Design and Construction Handbook - Merritt - Ventech!

CONSTRUCTION PROJECT MANAGEMENT 17.43
The interests of contractors, subcontractors, and building owners are very closely
allied. Particular attention should be given to the definition of these respective
interests in all insurance policies. Where the insurable interest lies may depend
upon the terms of the contract. Competent advice is frequently needed in order that
all policies protect all interests as required.
While the forms of protection purchased and the adequacy of limits are of great
importance to a prime or general contractor, it is also of great importance that the
insurance carried by subcontractors be written at adequate limits and be broad
enough to protect against conditions that might arise as a result of their acts. Also,
the policies should include the interests of the prime or general contractor insofar
as much interests should be protected.
This section merely outlines those forms of insurance that may be considered
fundamental (Table 17.1). It includes brief, but not complete, descriptions of coverages
without which a contractor should not operate. It is not intended to take the
place of the advice of experienced insurance personnel.
17.15.1 Fire Insurance
Fire insurance policies are well standardized. They insure buildings, contents, and
materials on job sites against direct loss or damage by fire or lightning. They also
include destruction that may be ordered by civil authorities to prevent advance of
fire from neighboring property. Under such a policy, the fire insurance company
agrees to pay for the direct loss or damage caused by fire or lightning and also to
pay for removal of property from premises that may be damaged by fire.
Attention should be given to the computation of the amount of insurance to be
applied to property exposed to loss. In addition, the cost of debris removal should
be taken into consideration if the property could be subject to total loss. Under no
circumstances will the amount paid ever exceed the amount stated in the policy. If
the fire insurance policy has a coinsurance clause, the problem of valuation and
adequate amount of insurance becomes even more important.
The form of fire insurance particularly applicable in the construction industry is
known as Builders Risk Insurance. The purpose of this form is to insure an owner
or contractor, as their interests may appear, against loss by fire while buildings are
under construction. Such buildings may be insured under the Builders Risk form
by the following methods:
1. The reporting form, under which values are reported monthly or as more
buildings are started. Reports must be made regularly and accurately. If so, the form
automatically covers increases in value.
2. The completed-value form under which insurance is written for the actual
value of the building when it is completed. This is written at a reduced rate because
it is recognized that the full amount of insurance is not at risk during the entire
term of the policy. No reports are necessary in connection with this form.
3. Automatic Builders Risk Insurance, which insures the contractor’s interest
automatically in new construction, pending issuance of separate policies for a period
not exceeding 30 days. This form generally is used for contractors who are engaged
in construction at a number of different locations.
There are certain hazards which, though not quite so common as fire and lightning,
are nevertheless real. The contractor should insist that these be included in
the insurance, by endorsement. A few of the available endorsements are: