When Hurricane Sandy made landfall in Jamaica at the end of October, many residents in Florida feared for the worst. Meteorologists were predicting that it could be just as deadly and destructive as Hurricane Katrina.
Though we may not have seen as much damage and destruction as the New England area of the Eastern Seaboard, many builders watched as tropical-storm force winds brought down projects before they had a chance to begin.
"Something half-built doesn't stand up as well as something fully built," said one head of a construction insurance operation currently surveying the damage in the New England area. The sentiments ring true here as well as many builders scramble to find out if their builders' risk insurance will pay out enough to recoup some of the costs from damages.
For those who may not be familiar with builders' risk insurance, it is a form of property insurance that covers damages received to a building or its materials during the construction process. This is especially important for builders in areas prone to fierce storms that can often times topple projects before they are completed.
In the wake of Sandy's destruction, many insurers in Florida and in other states along the Eastern Seaboard may be held accountable for paying "soft costs" which may have occurred when buildings missed their opening deadlines or if there was a loss of rent in commercial buildings. Despite the risk of potential conflicts, most contractors opt out of soft cost coverage. This can create complications down the road after property damage occurs because there is no clear distinction as to who will pay soft costs: the builders' risk insurance or the property insurance.
It's important to point out that speaking with someone well versed in business and commercial law before or even after damage has occurred can be incredibly helpful. This is especially true in situations where there are difficult conflicts and disputes that may require legal advice in order to sort out.
Source: The Engineering News-Record, "Claims Under Builders' Risk Policies Likely to Follow Sandy's Trail," Nov. 5, 2012