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Archive for the ‘Construction Insurance’ Category

Builder’s All Risk (BAR):

What is it? BAR coverage is first-party coverage which is essentially an all risk property policy, plus liability and protection and indemnity (P&I) extensions to it.

Who is to be included within the Named Assureds? The parties to be included within the Named Assured Clause include Builder, Sub-Contractors, Owners, Lenders if applicable, and other parties with insurable interests if applicable

Who is to have subrogation rights against them waived? All parties with whom the Named Assureds have agreed in their negotiations, in either a written or verbal contract, to waive the rights of subrogation should benefit from waiver of subrogation. Usually, Manufacturers of major equipment are not amongst the parties who receive the benefit of this waiver of subrogation; instead, they are held accountable for their product and uphold their warranties provided to the shipyard and are prepared to allow recourse against them for failure or defects in their product / equipment.

What is the period? We recommend that BAR coverage is in place during the entire course of the vessel’s / rig’s construction; i.e., that coverage commence upon contract signing, remain in place during design and engineering phase, throughout construction, and cease upon delivery to owner, be it ex-Yard or at final Site following a transit.

What is the Sum Insured? This sum is usually specified in the construction contract between Builder and Owner, and should include the estimated Final Contract Value (FCV) plus the Owner-Furnished Equipment (OFE) [plus it can include the value of the incoming hull in the event of a conversion].

The inclusion of an Escalation Clause allows for coverage up to a certain percentage above the Estimated Total Sum Insured, the standard provision being 25% escalation.

In theory, the Builder’s All Risk Underwriters reserve their capacity to ensure that they can pay four times (4x) the limit multiplied by the escalation provision. With an escalation provision of 25%, this means that Underwriters would require capacity to pay a claim of 500% of the Estimated Sum Insured, or 125% four times, i.e., once for physical damage, once for collision liability, once for protection & indemnity, and finally once for sue & labor expenses. We say “in theory” because in practical application, Underwriters would likely come to a point of ceasing to pay sue & labor charges and instead pay the full amount of the physical damage / replacement costs.

An example wherein each coverage section is used is this:

During construction, an oily rag falls into the engine room sparking a fire which burns out of control and burns the lines mooring the vessel to the dock. The vessel breaks free from her moorings, and then collides with another vessel at an adjacent shipyard which causes damages in the hulls of both vessels. Then, the insured vessel keeps on floating away out of control. The shipyard personnel quickly hire a nearby tug in an attempt to slow the vessel and get in close enough proximity to fight the fire. The fire is not brought under control and the vessel eventually sinks in a shipping channel. What is recoverable under a broad Builder’s Risk policy?



First party physical damage to be recoverable under the All Risk main section

Damage to the other vessel at the adjacent shipyard to be recoverable under the Collision Liability section

Wreck removal costs to be recoverable under the P&I section

Sue & Labor costs incurred by the hire of the tug boat and any fire fighting expenses to be recoverable under the Sue & Labor section



What are the Situation / places of coverage? We recommend that the Situation is territorial coverage which includes the movement of material and equipment between yards and various contractors’ yards. Additionally, we recommend ensuring the adequate distance that will be required during sea trials is specifically expressed within the coverage. (This is usually 250NM.)

If required, coverage can include items to become part of the vessel / rig under construction while in storage at Suppliers’ warehouses – usually those in relatively close proximity to the shipyard or else those specifically declared to Underwriters.

Coverage for Owner-Furnished Equipment (OFE) usually commences under the BAR section from the point whereby a Named Assured inspects and accepts delivery of same at the port near the relevant shipyard (either on land or at sea).

What comprises the Interest that is covered? We recommend that all contract works that are to comprise the new construction are included within the covered Interest. This includes all Contract Works of the Shipyard plus Sub-Contractors in respect of the construction in all its phases, including design, engineering, procurement, strike steel, keel-laying, fabrication, construction, dry-docking, undocking, installation of equipment, fitting out, supply of all materials pre-commissioning, testing, commissioning, sea trials and all works until delivery of the unit.

What are the parts of coverage usually afforded under BAR coverage?

a. Property All Risk - Subject to specific terms, conditions & exclusions, marine builder’s risk insurance (BAR) covers the builder / owner (others with an insurable interest – as specified in the policy) of a vessel / rig under construction against physical loss of, or damage to, the vessel / rig caused and discovered during the period of insurance. We recommend that any restrictions be removed; common ones in standard policies include those for earthquake, volcanic eruption, faulty design, and faulty welds.

b. Collision Liability - Sums paid by the respective Yard to any other person(s) arising out of the Yard’s legal liability to pay sums for the following damages, as consequence of any vessel the Yard is working on coming into collision with any other vessel:



Loss or damage to any other vessel or property thereon

Delay to, or loss of, use of any other vessel or property thereon

General average, salvage of, salvage under contract of, any such other vessel or property thereon.



c. Protection & Indemnity (P&I) -

Sums paid by Yard to any other party arising out of Yard’s legal liability to pay sums for the following damages, as a consequence of an accident or occurrence during the policy period:



Loss or damage to any fixed, movable, property or any other thing or interest whatsoever

Any attempted or actual raising, removal, destruction of any fixed movable object or property or other thing, including the wreck of a vessel, or any neglect to raise, remove or destroy same

Liability assumed by the Yard under contracts of customary towage for purpose of entering or leaving the port or maneuvering within a port

Loss of life, personal injury, illness, and payments made for life salvage.



d. Sue & Labor – Sums paid for the following expenses, as a consequence of an occurrence during the policy period, incurred in attempts to minimize recoverable loss:



In case of any loss or misfortune, it is the duty of the Assured and their servants and agents to take such measures as may be reasonable for the purpose of averting or minimizing a loss which would be recoverable under this insurance.

Subject to the provisions of this clause, the Underwriters will contribute to charges properly and reasonably incurred by the Assured their servants or agents for such measures. General average, salvage charges, collision defense or attack costs and costs incurred by the Assured in avoiding, minimizing or contesting liability.

Measures taken by the Assured or the Un
derwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.



What else should be considered / looked at with BAR policy?



Deductibles – Are they at levels that the Assureds can comfortably absorb? Do they apply per occurrence and/or in the aggregate?

Complete, detailed list of security and the ratings of the insurance companies and/or Syndicates participating on the risk

Wording in detail – including endorsements, exclusions, qualifications, subjectivities, sub-limits, Warranties (Conditions Precedent), adjustment factors applicable to premium, cancellation provisions

Confirmation that accurate and proper underwriting information, including loss histories, was presented to Underwriters who are providing coverage for the risks

Construction claims are happening more often now due to hurricanes, acts of nature as well as many builders and developers filing bankruptcy. If you have put money down to build a new home, only to find that the developer has gone bankrupt or a storm has destroyed the development, you may be able to make a construction claim.

Insurance companies that handle these types of claims will look at several aspects of the construction site before issuing a policy. Most insurance companies will cover any claims made from storm damage, but this may not cover everything. The insurance company will look at the solvency of the developer, the area where the construction is taking place as well as the value of the property.

Some instances where you may have a legitimate claim and be able to get money from an insurance company or developer include:

If the Home was Hit by Lightening or Destroyed by a Storm

The developer will have to have construction insurance in order for such a calamity to be covered. If the developer or builder does have insurance, then they will be covered for the damage. You, however, will not be covered for any inconvenience that it will cost you to stay an extra amount of time in a rental or another home. There is new construction insurance that you can get that will enable you to get coverage in case of such an occurrence. They will then compensate you for your loss. This will include extra time that you have to stay at a rental and cannot be in your property. The compensation has to be backed up with receipts.

If the Developer Goes Out of Business

If the developer goes bankrupt and you have new construction insurance, you may be able to make a claim. If not, you will be behind the banks and suppliers in order to retrieve any money that you put down on the house. Chances are that you will not see any money if you do not have construction insurance.

If the House is Vandalized

This will work just the same as if the house was damaged in a storm. You will not be compensated unless you have specific coverage.

Many people today who are thinking of having a home built are looking towards construction coverage. This protects their interest in the property in case of damage or, in some cases, bankruptcy on behalf of the developer or builder. With the new housing market at the lowest point it has been in nearly 30 years, there has been an onslaught of new construction claims with those who insure new construction.

Construction insurance has been rapidly increasing over the recent years and it has now become an absolute must in Ireland for both local companies and international contractors operating in the country. The main factors which motivate this popularity are the growing number of legal claims against construction contractors, the expanding range of covered risks, as well as the companies’ realizing that an insurance cover is much better than millions of nerves and pounds wasted in a legal suit.

While only several years ago Ireland was not a litigious country, this has started to change. Keystone Insurance, a leading insurance broker for Ireland’ construction industry, reports a dramatic increase of litigation in the sector. Construction defect claims have spread to all parts of the country, and have become easily accessible to practically anyone. Given this accessibility and the growing number of claims, most construction companies now prefer to play is safe and have insurance.

Insurance covers have likewise developed over time and can now be extended to practically all risks that can emerge on a construction site. As Keystone specialists point out, first time construction insurance quotes are arranged over a few hours, and the cover can be agreed over the phone. Companies can pay insurance policies in over ten equal installments.

As the need for construction insurance grows, insurers begin to offer new features and services, and accordingly customers become more and more demanding. It is often the case that Keystone clients have held construction insurance with the same broker or insurer for many years without checking the market to ensure that they are getting the best possible cover for their money. That is why Keystone Insurance offers a specialist service to contractors who wish to have their insurance needs fully met. The insurance team explores alternative insurers to ensure that customers eventually get what they need.

Keystone Insurance is a nationwide and independent insurance brokerage house offering specialist construction insurance solutions to the Irish construction industry. It arranges quotes for public liability and employer’s liability insurance, contractors all risks, personal accident, plant and machinery, contract bonds. The company also offers schemes for construction occupation, including traditional high risk occupations such as roofers, curtain wallers and scaffolders.