builders’ risk & installation floater: which coverage is right for your project?
The appropriate usage of Builders’ Risk and Installation Floater coverages can sometimes be difficult to determine. As a general overview, Builders’ Risk coverage is intended to cover either a single building or structure, or multiple buildings or structures, during construction, rehabilitation, or repair. Installation Floater coverage is suitable for most contractors engaged in low-to-moderate hazard installation activities, such as plumbing, electrical, heating, cooling and air conditioning, cabinetry, and alarm installations on new or existing buildings.
Scheduled Property Coverage
The Builders’ Risk Basic Form provides coverage on a special perils basis for materials and supplies during all phases of a building’s construction. This means that coverage applies to the laying of the foundation, the erection of walls, the construction of the roof, and the development of the interior of the building (e.g., plumbing, dry walling, etc.) while restricting coverage to buildings and structures that are specifically described on the declarations page. There are ten forms available for builders’ risk coverage, each with their own corresponding schedule of coverages and endorsements (IM 7050-7059).
Blanket Property Coverage
Builders’ Risk coverage may also be written on a blanket basis in order to cover the insurable interest of contractors who are involved with multiple, on-going projects, which eliminates the need for the frequent addition or deletion of multiple buildings at multiple locations.
- IM 7052 – Contractor’s Reporting Form covers Builders’ Risk exposures on a blanket basis.
- IM 7053 – Builders’ Risk and Installation Floater Form covers exposures that are expressed under both the Builders’ Risk Form and Installation Floater Forms on a blanket basis.
- Both IM 7052 and IM 7053 are written on a reporting form basis, and are also designed to provide coverage for the contractor’s interest in the building project when the building owner fails to obtain, or maintain, agreed upon Builders’ Risk insurance.
The valuation for covered property under these forms is on a replacement cost basis, with characteristics closely resembling Business Income, including the costs of materials and labor, overhead and profit, and related construction costs when losses are incurred by covered perils.
Installation Floater Coverage
The American Association of Insurance Services (AAIS) has developed eight installation floater coverage forms (IM 7100-7107), each with their own corresponding schedule of coverages. Installation Floater coverage is designed to provide coverage for property being installed, fabricated, or erected in a single construction phase, or process, in buildings being renovated, upgraded, or remodeled, as well as the labor involved in the process. Property includes the materials, supplies, machinery, fixtures, and equipment that will become a permanent part of an installation or construction project on the construction site, property at temporary locations, and property in transit, to and from the insurable location. Coverage applies to owned property and the property of others, covering the named insured’s insurable interest in the property, and is rated based on total annual receipts of sales.
It can be difficult to determine which coverage to use, especially when the specific job information and duties of the insured, potential and present exposures, etc. are unknown or unclear. Special care must be taken when determining the aforementioned. For these exposures, the underwriting process involves evaluating the experience of the general contractor and subcontractors performing the work, the construction of the building being built, the duration of the project, the location and transit exposures, the project’s controls and specific features, the contracts that dictate each party’s responsibilities when working at the jobsite, as well as the protective services and arrangements incorporated at the project to eliminate or reduce the possibility of loss.