Clearly, a crucial component of these losses is the period of indemnity; thus a sufficient time frame based on at least the planned duration of the construction should be considered.
Under a builders risk policy, the soft costs that are specified in the declarations are covered during the “delay” period. The delay period is typically defined as that period of time that commences with the anticipated completion date and ends when the project is actually completed. Often, there is a time deductible of, say, 14 or 30 days that attaches to the anticipated completion date and represents the commencement of the covered delay period.
Where due diligence is exercised and there are no other factors giving rise to the delay, the delay period is usually equivalent to the restoration period. In many cases however, other factors related to the loss may arise and contribute to the delay in the actual completion of the project. Examples of such factors are: change in sequencing of contractors and subcontractors, material and labor availability, seasonal/weather conditions, etc. In other words, the period of indemnity does not necessarily end when the damage caused by the loss is repaired or restored. Rather, the period of indemnity will end when the project is completed providing that factors not related to the loss or within the control of the insured contributed to the delay. Many inexperienced adjusters will often approach a delay loss in the same manner that they would approach the determination of the period of indemnity for a loss in connection with a completed building under a property policy. This often leads to contentious adjustment problems and/or an incomplete recovery for the sustained losses.
Often, the insurer will contend that the project wasn’t on schedule or there were other factors not loss-related that contributed to the delay in the actual completion of the project. We can hypothesize about how to deal with this, but the important lesson is to provide for an adequate period...