Will Builders Risk Policies Cover COVID-19 Losses?

If mandated shut-downs didn’t halt construction projects on tight deadlines, other factors related to COVID-19 are impacting sites across the globe, causing delays and raising construction costs. 

If Sal the construction manager’s team of workers are still allowed to show up to work every day, his supplies may not. Stay-at-home orders and social-distancing measures taken by manufacturers could be slowing down production of the supplies Sal’s team needs, or supply delivery could be delayed by increased shipping times due to the onslaught of online orders. Sal may also lack the amount of labor he needs to get the job done as some of his workers get sick, and others opt to stay home for protection or to take care of children now learning from home. 

Construction delays typically lead to an increase in project costs. Some of your clients may now be wondering if these unforeseen costs are covered by their Builders Risk policy. The experts say policies may cover the soft costs.

What Builders Risk Policies Usually Cover

Builder’s Risk Insurance can cover all kinds of loss or damage occurring during construction including:

  • Fire
  • Flood
  • Hail
  • Lightning
  • Explosions
  • Theft 
  • Vandalism
  • Acts of God, such as hurricanes (or COVID?)

The policy covers buildings and structures under construction, and it can also protect building supplies, materials, and equipment, whether these things have arrived on site, are in transit, or being stored at other locations.

Writing policies can be complex, and it’s important for clients to purchase a policy tailored to the needs and possible losses specifically associated with their projects. Because every project is unique, clients can customize policies. Common policy extensions are:

  • Scaffolding
  • Construction forms
  • Temporary structures
  • Debris removal and disposal 
  • Pollutant clean-up

Covered Soft Costs

A policy usually covers “soft costs” associated with a construction project in the event the project is delayed. For example, if damaged property or a loss leads to a delay of completion, then it can result in lost sales, rental income, additional interest on loans, or real estate taxes. Soft costs might also include a difference in architectural and engineering costs, as well as the legal, accounting, and financing fees incurred from an unforeseen delay in construction. 

How Some COVID-19-Related Losses May Be Soft Costs

No property owner, developer, or contractor could have foreseen a pandemic of this severity, and it’s possible their policy writers didn’t either. This means their policies may not have specifically stated exclusions for “viruses” or “pandemics.” As a result, if the client’s policy covers Act of God “losses” (and not solely “damage,” a much narrower definition), and there is no policy exclusion for a “virus,” then it’s possible COVID-19 losses may be covered.

Exclusions using the words “virus” or “pandemic” have been available to companies for years, and many providers began including virus-specific language in policies following the SARS outbreak. As a result, if those words were not specifically used, then it’s typically assumed the insurance company chose not to use the virus exclusion when it wrote the policy. 

Although, it’s important to remember …. Failure to include the term “virus” doesn’t mean a provider WILL cover the loss. Right now, COVID-19-related losses are still being debated by many, and you’ll have to check with the individual provider to see if the policy will cover pandemic-related loss. 

QSR Builders Risk Offerings

Quaker Special Risk provides solutions for hard-to-place Builders Risk and Rehabs up to 100 million dollars, from new homes to high-rises, for all construction types including renovations. We cover:

  • Unlimited theft of unfixed
  • Building material
  • Pollution cleanup 
  • Debris removal
  • RC available of existing structures
  • Transit
  • Soft costs
  • Permission to occupy
  • Earth movement
  • Flood
  • Temporary structures
  • Premises liability including for subs 

Please use our online tool for pricing and quotes on customized policies.

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