Facts on Builders Risk

By Amy Brown

When constructing a new facility or expanding a current one, itis critical to include insurance in the planning of the project. Constructionsites involve unique risks that may not be included in a standardbusiness-insurance policy. It is important to research the potential hazards ofa project prior to breaking ground.

Facilities under construction are vulnerable to damage fromthe elements and other threats. For example, they are an easy target for thieveslooking to steal tools or materials left on site. They may also increase anowners risk of liability. Construction sites are considered attractivenuisances. That is, they contain items and conditionssuch as machinery,dirt piles, open pits, tools, and building components and materialsthat makethem appealing to explorers. Liability could be placed on the owner orcontroller of the premises in the event of an accident, regardless of whetherthe person was trespassing.

Storage owners should take precautions to safeguard theirconstruction sites. The best way to avoid accidents is to block access to thesite with a locked fence and signs that indicate trespassing will not betolerated.

Builders Risk

Builders-risk insurance is a specialized policy designed tocover the property-loss exposures associated with construction projects. Thiscoverage protects the owners investment from direct physical loss to thestorage buildings during the progress of construction. Coverage may be writtenfor the completed value of the project and can be extended for facilities underexpansion. Buildings under construction may be included, and then endorsed tofinished operations.

The insurance-requirements section of the constructioncontract should specify who is responsible for purchasing the builders-riskinsurance and exactly what coverages to include in the policy. In some cases,the builder may be responsible for providing coverage. In others, it may be thestorage owner/developers responsibility.

It is important to read and understand the details of abuilders-risk policy, as such policies can vary significantly. Propertycoverage will depend on the wording of the Property Insured and PropertyExcluded sections. Both should be read carefully to understand what is covered, as well as the amounts, limits and restrictions.

Property covered by a builders-risk policy can include allfixtures, materials, supplies, machinery and equipment to be used in theconstruction. Scaffolding, false work, fences and temporary structures may be also covered. It is important to know where propertycoverage will take place, as there may be limits on property that is offsite or in transit. Some policies may exclude theft, wear and tear, ordinance orlaw, machinery, testing, workmanship or materials, design error,collapse, flood, earthquake, etc.

Knowing what perils are excluded from the policy will help anowner avoid surprises if a loss occurs. It also provides him theopportunity to purchase any available endorsements for additional protection.

Disclaimer: This article was written as a guideline to aid inminimizing risk in self-storage facilities. The information contained inthis document is intended to be of general interest and does not address thecircumstances of any particular individual or entity. Nothing in thisdocument constitutes legal advice, nor does any information constitutea comprehensive or complete statement of the issues discussed or the laws relating thereto.

Universal Insurance Facilities Ltd. offers a comprehensivepackage of coverages specifically designed to meet the needs of theself-storage industry. For more information, or to get a quick, no-obligation quote,call 800.844.2101; e-mail [email protected]; visitwww.vpico.com/universal.

Protect Yourself With Insured Contractors

During facility construction, accidents resulting in property damage or injury to tenants, employees or the general public can happen, even with the most reputable company. Hiring contractors with proper insurance coverage is a good way to protect your facility from vendor-liability exposures.

The best way to prevent blame is to take appropriate measures when hiring contractors. Seek out reputable firms that are licensed, bonded and insured. Get references from business associates or friends who have had good experiences. Request from the contractor a certificate of general-liability and workers-compensation insurance.

A certificate of insurance is evidence the vendor is insured by a financially stable company and carries adequate amounts of coverage for the service being performed. It should contain information on the insurer, insurance agency, types of insurance, policy numbers, effective dates, limits,certificate holders and any special provisions. Check to see the vendors policy limits are at least equal if not greater than those for your facility and the policy effective dates are current.Hiring licensed professionals with proof of insurance may drastically reduce your liability in a vendor-related claim.