Ability to recover for soft costs incurred resulting from a weather delay in construction
Part 4 of a 4 Part Series on Construction Weather Risk Management
By Gina Lozier and Jeffrey Wertman
This article was first published on Law360, A LexisNexis Company, and is republished here with permission of the authors.
An insurance policy which includes coverage for time element losses may also include a waiting period in which the insurance company does not owe for certain damages until a predetermined amount of time has passed after the loss. In the event of a hurricane, it is common to see business income coverage provisions which do not provide coverage until 72 hours after the loss. This nuance can make an enormous impact on a small business open during the course of construction but forced to close as the result of a catastrophic event.
One of the other critical coverages available to an owner under a builder’s risk policy is the ability to recover for soft costs incurred resulting from a delay in construction. Soft costs are any costs not considered direct construction costs and can include loss of rent, bond and permit fees, real estate taxes, insurance, additional interest on construction and permanent financing, advertising and promotional expenses, architectural and engineering fees, legal and accounting fees, and other administrative costs. A typical soft costs provision or endorsement provides coverage for the necessary expenses relating to the construction, erection, or fabrication of a building or structure that are over and above those costs that would have been incurred had there been no delay.
Builders risk insurance is critically important to building owners and contractors with ongoing construction projects, particularly during hurricane season. Although expenses such as the cost to repair or replace loss or damage to physical property, materials and labor, are more apparent, soft costs and time element coverage should be considered. Without such coverage, a storm can cause a significant financial burden to repair and complete a construction project.
Gina Clausen Lozier and Jeffrey S. Wertman are partners at Berger Singerman LLP.
This article is for general informational purposes and is not intended to be and should not be taken as legal advice.
More in the next blog post about weather decision support, weather safety and weather risk management…
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