As a general rule, builders risk policies cover fire, flood and pestilence; basically old testament disasters. Many policies have exclusions for poor workmanship, design errors and omissions. If there is a design error or omission and it causes damage, is that resulting damage covered? Even under newer builders risk policies, the answer is “yes.” In many current versions of builders risk policies there is coverage for a “covered cause of loss.” Coverage is for “direct physical loss to covered property from any of the covered causes of losses.”
There are many exclusions and limitations. Some of these include government action, nuclear hazard, war, military action, earth movement, volcanic eruption, flood, fungi, rot, dry rot, virus, bacteria or other microorganisms. Some limitations are delays, dishonest or criminal acts, falsification of information and artificial generated electricity.
AIA’s A-201 2007 General Conditions of the Contract for Construction Article 11 §11.3.7, general waiver of subrogation states that all parties to the construction project, owner, architects, general contractors and subcontractors etc. waive any rights of subrogation against each other. Additionally, they agree that insurance proceeds provide a maximum amount that any party can recover. If multiple parties are injured, they share on a pro-rata basis. This could financially impact anyone involved in the construction because insurance proceeds may not sufficiently cover a complete loss of a particular party.
Carefully examine builders risk coverage, deductibles and limits to make sure there is enough funding if a loss occurs.
If you have any questions about builders risk, please do not hesitate to send me an email at firstname.lastname@example.org.