In construction, it's common practice to obtain a single builders risk policy that covers the property interests of the owner, general contractor, and all subcontractors involved. This approach not only helps in minimizing costs and disputes but also supports maintaining the project's timeline and budget. However, it's crucial for contractors to verify that they have received the coverage they expect.
1. Understanding Coverage Needs:
- Named Insured vs. Insured: The most comprehensive coverage is typically available to named insureds. Some policies might extend similar protections to insureds under specific conditions, but the safest route for full coverage and rights within the policy is as a named insured.
- Policy Review: Always conduct a thorough review of the policy's terms to confirm that the difference between being a named insured and an insured is only administrative, such as payment of premiums or notice of cancellations.
2. Contract Requirements:
- Stipulation for Coverage: Ensure the construction contract stipulates that all parties (owner, general contractor, and subcontractors) are to be included as named insureds in the builders risk policy.
- Verification: After the contract is in place, verify that the actual builders risk policy lists all relevant parties as named insureds without restrictive clauses such as “as their interests may appear.”
3. Implementing the Coverage:
- Initial Setup: When setting up the builders risk policy, explicitly request that the insurer includes all specified parties as named insureds and check that this is reflected in the policy documents.
- Ongoing Review: Regularly review the policy documentation to ensure compliance and address any changes in the project scope or involved parties that may affect coverage.
4. Additional Resources:
- Builders Risk Book: For further information on how standard construction contracts handle builders risk insurance and detailed advice on naming insureds correctly, consider consulting resources such as the Builders Risk Book.
- Professional Advice: When in doubt, seek professional advice from experienced insurance brokers or legal advisors specializing in construction insurance.
Achieving named insured status on a builders risk policy is critical for ensuring that all parties involved in a construction project are adequately protected. By following the guidelines outlined above, brokers and insureds can help safeguard their interests and facilitate smoother project execution.
