1. Builder’s Risk - Claim Adjustment Challenges
17th Annual Willis Construction Risk Management Conference
Builder’s Risk - Claim Adjustment Challenges
Dave Passman, Senior V.P. – National Director
National Property Claims – Willis Group
Tom Vickers, Shareholder
Vanek, Vickers & Masini, P.C.

2. Builder’s Risk Insurance
AGENDA
Builder’s Risk Insurance
What it is, and what it is not.
Pre-Loss Strategies
Have a plan.
Post-Loss Strategies
Actively manage the process.
Dealing with coverage issues.
Dealing with quantum issues.

3. Builder’s Risk Insurance
SCOPE OF COVERAGE
Property insurance coverage for physical loss or damage to buildings and structures during the course of construction, renovation or repair, unless excluded by the policy language.
All-risk v. named-peril.
Physical loss or damage to covered property during policy period.
This is property insurance, not liability or warranty.
Hard costs v. soft costs.

4. Builder’s Risk Insurance
“Covered Property” defined as:
“buildings or structures … while in the course of construction, installation, reconstruction, or repair.”
“Property Not Covered” defined as:
“existing buildings or structures to which improvements, alterations, repairs, or additions are being made.”
Conflicting policy provisions can create ambiguity.

5. Builder’s Risk Insurance
Pre-Loss Strategies
Have a plan for what you will do in the event of a loss
- Identify person who will have ownership of the claim.
- Identify your team.
- Internal
- External (broker, forensic accountant, lawyer)
- Identify risks and what you will do to mitigate loss.
- Understand duties under the policy in the event of loss.
- Other.

6. Builder’s Risk Insurance
POST-LOSS STRATEGIES
- Provide notice.
- Calendar key dates.
- proof of loss; statute of limitations
- Execute your plan.
- Get the project back on track.
- Document and Communicate.
- with the adjuster, team members, and management
- Be prepared to devote substantial time to the process.
- requests for information and examination under oath

7. Builder’s Risk Insurance
COVERAGE ISSUES - coverage
Faulty Design, Workmanship, or Material Exclusion
“We will not pay for loss or damage caused by or resulting from: faulty, inadequate or defective design, workmanship, repair, materials …”
“… but if loss or damage by a Covered Cause of Loss results, we will pay for the loss or damage caused by the Covered Cause of Loss.”
“… however, any ensuing loss or damage is covered.”

8. Builder’s Risk Insurance
COVERAGE ISSUES – quantum
Advanced Loss of Profits and Loss of Rents Coverage
- delay in completion
- period of restoration and period of delay
- waiting period and deductible
Soft Costs Coverage
Hard Costs Coverage

9. Builder’s Risk Insurance
HARD COSTS
Cost to repair/replace damaged property
Cost to clean-up debris
Overhead and Profit

10. Builder’s Risk Insurance
SOFT COSTS
Additional Expenses over and above the projected project cost as the result of:
An insured property loss.
Which delays the project beyond the projected completion date.

11. Builder’s Risk Insurance
“Basic” Insured Soft Costs
Interest on construction or repair loans
Property taxes or assessments
Advertising and Promotional Expenses
Costs and Commissions for Lease Renegotiation
Expenses to Reduce Loss – to extent successful

12. Builder’s Risk Insurance
Other Common Insurable Soft Costs
Legal and Accounting Fees
Architect, Engineer, Consulting Fees
Insurance Premiums
Renegotiation of Financing
Closing Costs
License and Permit Extensions
Contractor or Developer Overhead Costs
Letters of Credit
Loss of Tax Credit
General conditions (may be specified)
Increased Cost of Construction from Delay
Access to Project Prohibited by Civil Authority
Other Appropriate to the Project

13. Builder’s Risk Insurance
Generally Excluded Soft Costs
Penalties/Liquidated Damages
Loss of Income

14. Builder’s Risk Insurance
Soft Cost Claim Issues
Did an insured property loss occur?
Did that loss result in a delay in completion?
Loss Quantum – What insured Soft Costs were incurred?

15. Builder’s Risk Insurance
THE Soft Cost Claim Issue “Did the insured property loss cause a delay in completion?”

16. Builder’s Risk Insurance
Questions the adjuster WILL raise
What is the contract completion date?
What is the actual completion date?
What was the loss impact on the completion date?
4. Were there any other issues which impacted the schedule?
5. Is the job on schedule? Really? Prove it!

17. Builder’s Risk Insurance
Being prepared for the Soft Cost Claim
Have a good project schedule/critical path.
Keep the schedule current, and accurate.
Consider the insured property loss repair methodology in context of the project schedule.
Document “excluded losses” and how they impacted the schedule.
Maintain good records of schedule monitoring.
Assume the adjuster will have experts audit the schedule.
7. Calculation of delay - # occurrences and deductible issue.

18. Builder’s Risk Insurance
QUESTIONS?