Hi, I'm David Green and I'm a Commercial Risk Advisor at CapriCMW, specializing in property development and construction insurance.
A construction project carries a number of risks for all parties involved, with lots of potential for accidents, property damage, theft, fire and more, that can cause delays and skyrocketing costs. Insurance is a tool to transfer the financial burden. In particular, there are two main types of insurance policies important to secure prior to the beginning of any project.
One, Course of Construction, otherwise known as Builder's Risk Insurance, covers all property being incorporated into the project. The policy is placed in the names of the owners, all contractors, sub-contractors and consultants engaged in the project.
From the liability perspective, the insurance can be placed on one policy, called a Wrap Up Liability policy, which is in the names of the owners, all contractors, sub-contractors and consultants engaged in the project. The Wrap Up policy helps simplify administration and claims handling, because everyone in the project is covered by one limit and one set of deductibles.
Beyond the insurance, there are some additional measures to help further reduce the risks involved with every construction project:
- A comprehensive risk management program should include contractual risk transfer, so ideally, the language in the contract is written so that the financial burden of a loss is placed on the party best able to control or prevent the cause of that loss. The project owner, or general contractor, is therefore not held responsible for injury or damage caused by a sub-contractor.
- It's important to start discussions with lenders early in the process, to ensure all requirements are met to secure your project financing. In many cases, you can wind up undergoing a lengthy process of negotiations and reviews.
- Insurance and risk management is also an important component in the air space parcel agreements. If you're planning to create separate legal parcels for residential and commercial space in the same building, consult your broker early in the process to understand your insurance responsibilities.
- Finally, it's critical that all parties involved in a construction contract have a complete understanding of applicable warranties, ensuring there's clarity on each party's rights and obligations.
At CapriCMW, our Risk Advisors bring decades of experience and specialized expertise on property development and management. For more information and resources, contact a CapriCMW Risk Advisor.