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Insurance Clauses - Builders Risk

Builders' Risk

​During the term of this contract, contractor shall maintain in force, at its own expense, builders´ risk insurance on an all risks of direct physical loss basis, including without limitation, earthquake and flood, for an amount equal to the full completed value of the covered structure or replacement value of alterations or additions. Any deductible shall not exceed $250,000 for each loss, except that the earthquake and flood deductible shall not exceed 2 percent of insured coverage for project or $250,000, whichever is greater.  The policy shall include an occupancy clause and list as loss payee the State of Oregon, Department of _______.

​Use when a new building is being constructed, when substantial alternations will be made to an existing structure, i.e., bearing walls, lifting foundations, extensive construction, or when equipment is installed in an existing building.

​​Coverage for direct physical loss by a covered peril to an entire building or other structure at the "jobsite" during the course of construction, including limited coverage (See also Builders´ risk installation floater) for the building supplies and materials that will become part of the covered structure.

  • Also covers:
    • Foundations, excavations, grading, filling, attachments, permanent fencing, and other permanent fixtures.
    • Scaffolding, construction forms or temporary fencing at the described "jobsite" and temporary structures at the described "jobsite".  
  • Does not cover:
    • Construction of structures other than buildings, i.e., tunnels, bridges, roads, culverts. etc.
    • Land on which covered property is located.
    • Other property not covered includes aircraft or watercraft, automobiles, contraband, money and securities.

Coverage should be endorsed to include “soft costs coverage”. This coverage insures various incidental expenses that may result from a physical loss by a covered peril to a building project. Soft costs coverage differs among insurers. The most frequent causes of loss are fire, theft and vandalism. Bonds do not cover this risk. Alternative insurance called “wrap-up” may apply on very large construction projects ($90 million and up).

​Soft costs coverage - Added as an endorsement. Covers various incidental expenses resulting from a covered physical loss to a building project. Coverage differs among insurers , however, costs likely covered include additional:

  • Interest on funds borrowed to finance reconstruction or repairs.
  • Real estate taxes.   
  • Advertising expenses. For example, to find new tenants for an office building whose completion date was delayed by several months due to a covered peril.
  • Costs and commissions resulting from the renegotiation of a lease. 
  • Architects´ and engineers´ fees.  
  • Insurance premiums. For example, for the additional period of time required to rebuild or repair the building. 
  • Legal and accounting fees.

​​New structure?  Limits should cover the full completed value of the building or structure.

Altering an existing structure? The limit should cover replacement value of alterations or additions.

Note: When a loss settlement is paid, if the limits of coverage are less than 100% of the full completed value of the covered structure or alterations, a penalty will be imposed by the insurer and only part of the loss will be paid. The value of the covered structure or alteration means "the total value of the property at the time construction would have been complete had there been no loss."

Builders' Risk Installation Floater

​For projects with equipment, materials, or fixtures valued over $10,000 to be installed, in-transit, or stored off-site contractor shall obtain, at contractor’s expense, and keep in effect during the term of this contract, a builders´ risk installation floater for coverage of contractor’s labor, materials and equipment to be used for completion of work performed under this contract.  The minimum amount of coverage to be carried shall be equal to the full amount of the contractor´s labor, equipment, materials, or fixtures to be installed, in-transit, or stored off-site during the performance of this contract. The policy shall include as loss payee the State of Oregon Department of _______, the contractor and its sub-contractors as their interest may appear.

​Use whenever a building is being constructed, repaired, or remodeled and there will be more than $10,000 in building materials and supplies at a storage location,  in transit, or during the installation and testing process that are intended to become a permanent part of the building.

​Builders´ risk installation floaters cover property installed at a work site by a particular contractor or sub-contractor. The coverage normally applies while the property is in transit or in temporary storage, and during the installation and testing process.

Installation floaters are generally associated with such property as plumbing, heating, cooling, and electrical systems but can be used to insure any property being installed. Carpeting, tile, windows, elevators, and machinery are examples of property that can be covered.

Theft and vandalism are covered. Coverage is usually an add-on to a builders´ risk policy, but may be purchased separately by sub-contractors on the project. A separate policy may be written for specific job sites, or a blanket policy may be written for a contractor who has many jobs in progress at the same time.

  • Coverage usually ends at the earliest of the following:
    • When the financial interest of the contractor (insured) stops.
    • When the state (purchaser) accepts the property as complete.
    • When the policy expires or is canceled.
  • Coverage should extend until installed equipment, materials or fixtures are accepted by the state upon satisfactory completion by the contractor.

​Minimum limits of coverage should be equal to the full amount of the contractor´s labor, equipment, materials, or fixtures to be installed, in-transit, or stored off-site during the performance of the contract.