...the income coverage at full value. By doing so, the named insured(s) will, in the event of a major loss, have a comprehensive insurance program in place that will minimize if not eliminate the risk of uninsured losses.
In addition to providing the appropriate soft cost and income coverage, and allowing for a sufficient period of indemnity, another critical element when developing a comprehensive insurance program is to be certain that the interests of all parties involved in the project be contemplated and incorporated into the policy. Typically, either the owner or the contractor will procure the builders risk policy. What happens frequently is that the party procuring the insurance usually obtains coverage based on its interests. As a result, the interests of other parties are often overlooked or not sufficiently addressed.
Identifying the interests of the parties to the policy and the construction contract is an absolute prerequisite to developing a proper and comprehensive insurance program. Failing to cover the interests of all parties will leave gaps in the coverage and most certainly lead to disputes between the parties.
Adjusting builders risk losses is difficult enough without interjecting feuds between the various insured parties. For example, in a real life situation, a policy procured by the owner/ developer of a major office project included coverage for rental value to protect its interests in the rental income from tenant occupancy. Rental value is typically defined in the policy as “anticipated income from tenant occupancy plus continuing normal operating expenses including the amount of charges and expenses that would be the legal obligation of the tenant but would otherwise be the owner’s obligation...”
It does not include any other type of earnings. Therefore, what about the interests of the contractor? The contractor is a named insured on the policy and as such is entitled to all of the benefits provided by that policy. Although the contractor does not...