Difference in Conditions Coverage: What Is It and Who Needs It?

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...requested extra expense coverage on the primary policy, but neglected to request it on the DIC policy. The agent’s errors and omissions insurer paid most of the insured’s extra expense loss, and the agent paid the remainder. Then the agent sued the broker, alleging the broker should have reviewed the agent’s coverage requests and notified it when the requests for extra expense coverage were dissimilar. The court, in an unpublished opinion, held that the broker had no duty to review the agent’s work, and thus the broker was not responsible for any contribution toward the insured’s loss.

Builders Risk DIC Policy

Oftentimes the project owner (or general contractor) will purchase a builders risk policy on a project that is not as broad as that which the general contractor or subcontractor ordinarily would purchase, or perhaps it has a much higher deductible than the general contractor (or subcontractor) would have. In such cases, the general contractor (or subcontractor) can purchase a builders risk DIC policy that covers any loss that is excluded or that is under the deductible of the owner’s or general contractor’s policy. The coverage, of course, would be subject to the exclusions and deductible in the DIC policy.

Conclusion

ADIC policy provides coverage that is typically not available in standard property insurance and excess coverage for losses covered by a primary property policy. Now that it has become quite common for property forms to provide coverage on an all-risks basis, the need for DIC coverage to fill coverage gaps has decreased somewhat. Nevertheless, DIC coverage serves a useful purpose, most notably for insuring flood and earthquake exposures and certain specified losses such as those stemming from transit or property losses overseas, and business interruption losses resulting from floods. The latter is especially important considering that currently, the NFIP program does not offer business interruption coverage.

As a caution, keep in mind that there is no standard DIC policy, so whenever a policy is in play, it must be reviewed carefully. That includes upfront when a policy is purchased and most assuredly when a loss involving a DIC policy occurs and a claim is made.

”…it is important to note that currently, the NFIP program does not offer business interruption coverage, and it is advisable that insureds give serious thought to including this coverage when purchasing a DIC policy.“


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