Soft Cost or Delay in Opening: Insure for the Potential Exposure

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Another common coverage found in most builders risk policies is expediting expense, which must be distinguished from extra expense. The typical language is as follows:

Expediting costs and additional cost of construction materials and labor:

This coverage will indemnify the insured for costs that are incurred to accelerate the repairs and reduce the delay period. The benefit of this coverage is that it does not require the insured to demonstrate that there was a reduction in the amount of loss that would otherwise have been payable. The drawback is that underwriters typically do not offer much in the way of limits for this type of coverage. It is usually $50,000 or $100,000 and occasionally $250,000.

Because accelerating the completion of a project post-loss relates not only to the damage repairs but also to the completion of the project as well, it does not take long to exhaust this coverage when construction crews are working extra shifts, weekends and holidays. Accordingly, it is advisable to have a gross earnings and/or expense coverage in place to eliminate potential uninsured losses. With this, the last of the typical and frequent gaps in coverage have been minimized if not eliminated.

Conclusion

Builders risk coverage has been, and most likely will continue to be, the source of much controversy and confusion. Many of the issues that result in uncompensated losses and/or litigation could be minimized if not eliminated by proper underwriting of the risk.

Having the proper builders risk coverage in place should provide some peace of mind in knowing that your policy will provide the necessary foundation for recovery and minimize the financial impact of uninsured losses.

Tony D’Amico, SPPA Adjusters International

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Sheila E. Salvatore

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