A construction crew wraps up work on a residential building late Friday afternoon. Unbeknownst to the general contractor, an oily rag was left in a bucket in the garage. The next day, the hot summer sun causes temperatures to rise, and the rag bursts into flames.
The project and all materials are destroyed.
Can you imagine the hit your bottom line would take if you had to do the whole job again on your company’s dime?
Course of Construction Insurance exists to insure buildings or projects under construction against the costs of repair or replacements in the event of an accident just like the one mentioned above.
Course of Construction (COC), also known as Builder’s Risk Insurance, is designed to protect owners and contractors from the devastating impact of fires, floods, vandalism, theft, and other unwelcome accidents to a construction project.
Who Benefits From A Course Of Construction Policy?
COC provides both owners/developers and general contractors peace of mind.
Owners are assured their contractors will have the funds to rebuild in the event of a loss, and contractors are assured they will have the costs available to start over in such an event.
Since course of construction insurance covers a number of parties, it can be obtained by the owner, contractor, engineer, or project manager. The party responsible for obtaining COC may be specified in the construction contract itself. The owner and/ or general contractor typically obtains the policy, and are covered as “named insureds” who are protected from paying for losses out of their own pockets.
Subcontractors are included on a COC policy as “unnamed insureds,” receiving the same coverage benefits regardless of whether the policy was taken out by an owner or contractor.
Both named and unnamed insureds on a COC policy are protected from legal suits if they happen to be the party responsible for the loss, as an insurer cannot bring action against someone covered by the same insurance policy.
What is Covered with a COC Policy?
If vandals break into your construction project and cause damage to the property and the supplies that were there, you won’t have to pay out of pocket to replace your materials.
A COC/ Builder’s Risk policy covers the project property, including the materials and supplies necessary to complete the project.
In the wake of damage left behind by a flood or earthquake, COC will cover expenses incurred to remove site debris and any potential demolition needed to repair damaged areas of the structure.
The full value of a completed project covered in the policy could also include extra work fees for architects and engineers, the costs of barricades and additional site structures such as temporary buildings, and even soft costs such as legal fees or premiums.
Risks Covered by COC
Course of construction is a policy that truly protects against unforeseen accidents. The typical risks covered include:
- Impact by aircraft or vehicles
- Riot, vandalism and malicious acts
- Windstorm, hail and rain
- Burglary and theft
Risks that are typically excluded from these types of policies may include mechanical breakdown due to negligent operation; loss due to faulty design, material or workmanship; wear and tear; or inherent vice: a problem or quality incidental to the property itself which brings about its own loss or destruction.
While it protects many parties from many risks, Course of Construction Insurance is not a catchall.
It does not cover a contractor’s tools and equipment, be they owned, leased, or loaned. Some policies also exclude soft costs, i.e. the labor costs to redo the work.
COC also doesn’t cover motor vehicles. Combining coverage for Tools and Equipment and Commercial Auto with your COC policy is a better way to protect your assets as well as the construction project from unforeseeable, costly events.
You can’t control the weather, you never know when a vandal will strike, and the actions of your subcontractors could always lead to a loss; that’s why contractor’s reduce their risks with a policy for Builder’s Risk.