Insurance – Builders Risk Insurance

There are many different types of insurance.  Under the category of commercial insurance is an insurance called Builders Risk Insurance.

Buildings under construction create unique coverage problems which builders risk insurance attempts to alleviate.  Because builders risk insurance forms are designed to cover buildings or structures under construction, they attempt to specify the point at which construction is deemed to be completed and when coverage ceases.  At that point, the building owner needs to obtain a BPP or other comparable property coverage to replace the builders risk policy.

The builders risk form covers the building or structure being built, building materials and supplies intended to become a permanent part of the building, and temporary structures.  Like the BPP, the builders risk form must be combined with the basic, broad or special cause of loss form and any necessary endorsements to form a complete policy.

The standard builders risk policy contains several standard exclusions.  In the 1989, Corpus Christi Court of Appeals opinion, National Fire Insurance Co. v. Valero Energy Corp., shows a loss caused by the builder’s “faulty design” is not covered by most builders risk policies.

According to the 1986, Tyler Court of Appeals opinion, Thompson v. Trinity Univ. Insurance Co., losses under most builders risk policies are calculated based upon the actual value of the building.  As is pointed out in the 1986, Austin Court of Appeals opinion, American General Fire & Casualty v. Buford, the insured making a claim bears the burden of proving the value of the actual damages to the building.

The 1977, Waco Court of Appeals opinion, Republic Insurance Company v. Hope, says the builders risk coverage form is intended to cover buildings only during the course of construction.  The builders risk form therefore contains an explicit statement of when coverage ends.  The statement is contained in the “when coverage ceases” provision.  Unless the insurer specifies otherwise, coverage ceases when an insured building is occupied, is whole or in part, or is put to its intended use.

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