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

Adjusters International Disaster Recovery Consulting EDITOR’S NOTE To address the all-important topic of soft cost or delay in start-up coverage, we welcome first-time Adjusting Today author,Tony D’Amico. A veteran public adjuster, Mr. D’Amico has more than 30 years of experience in the insurance industry and in this in-depth feature article, he brings his specialized expertise to bear on what is today considered a highly important, but often overlooked, facet of coverage. In addition to discussing the evolution of builders risk coverage over the years and examining some of the factors responsible for its transformation, Mr. D’Amico focuses attention on soft cost exposure, also known in the industry as delay in opening or start-up coverage. By sharing his personal experiences over the past three decades, the author’s intent is to help readers avoid many of the adjustment issues that can arise in a builders risk loss from policies that fail to include a comprehensive scope of coverage. Soft cost coverage is a topic that can be controversial and confusing, but Mr. D’Amico has wisely broken it down into consumable pieces that, taken together, convey a simple message: many potentially thorny issues can be headed off by proper underwriting of risk. I hope that you find the information presented here of benefit in your day-to-day operations or interactions with clients and that we have provided you with a useful resource. — Sheila E. Salvatore, Editor By Tony D’Amico, SPPA Over the past 30 years, we have witnessed the evolution of builders risk coverage from a basic sticks and bricks policy to a very complex mechanism for insuring a multitude of risks to which a construction project may be exposed. The focus of this article will be on the soft cost exposure or what is commonly referred to as delay in opening or start up. Soft cost coverage evolved in response to the increasing number of projects with construction time frames in excess of one to two years. Moreover, as large projects are often supported by very complex financing arrangements, lenders look to this type of coverage to protect their interests particularly from the standpoint of the income expected to be generated by the project. When a catastrophic loss delays the completion of the project, the resulting income loss and additional carrying costs can be enormous. Hence, the development of soft cost coverage and the need to Soft Cost or Delay in Opening: Insure for the Potential Exposure

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