Mind The Gap - Builders Risk, General Liability And Workers Compensation Coverage Are Indispensable When Managing The Risks Of A Construction Project But Beware Of The Gaps!

Author:Mr Kevin Connolly and Robert M. Horkovich
Profession:Anderson Kill & Olick, P.C.

Originally published from Risk Management, October 2009 issue issue, page 60. Copyright 2009 Risk and Insurance Management Society, Inc. All Rights Reserved. www.rmmagazine.com Builders risk, general liability and workers compensation coverage are indispensable when managing the risks of a construction project. One set of exposures that sometimes goes unrecognized, however, is the risk of moving materials and equipment from a remote location, such as a factory or port, to the site and incorporating them into the work. Sometimes, these exposures are covered by the builders risk insurance, and sometimes not. The gaps result from a variety of sources. Commercial property forms of insurance do not cover materials and equipment until they arrive at (or close to) the site. Inland marine forms are usually more generous, but it is not often available for interior projects. Insurance policies that address these exposures are generally inland marine floaters, and include transit, storage and installation floaters. The term "installation floater" is sometimes used as a label for transit coverage that is built into a builders risk policy, and the frequency of that usage leads to confusion about what coverage applies and under which policies. It is not unusual to encounter a so-called "installation floater" in which coverage ceases upon arrival of the shipment at the worksite. The risk of loss during the actual installation of the equipment might not be found in every installation floater. From the time that a shipment of goods leaves the seller's facility, the risk of loss is almost always allocated to the purchaser, regardless of when title to the goods is transferred. If the purchaser does not take steps to procure floater coverage at that point, there might not be any first party coverage on the shipment until it arrives as the construction site. Common carriers owe an elevated duty of care, and most claims for lost, damaged or misdelivered goods are honored, but "most" is not the same as "all," and a claim under a liability policy—even one as broad as a carrier's legal liability policy—is never as simple as a first party claim. If the purchaser's sole concern is the transit risk, then insurance coverage can be put in place by calling for the contract to contain a "CIF" term. This means that the invoice price includes the cost of the goods, freight to the destination and inland marine insurance covering the goods while in transit. If the job site is unable to...

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