Builders’ risk insurance is a type of property insurance that covers property, material, equipment, and supplies over the course of construction. Builders’ risk generally covers events such as fire, theft, or vandalism; however, many contractors are now asking if it covers costs stemming from the coronavirus disease 2019 (COVID-19) pandemic.
Below, the Fort Lauderdale construction attorneys with Cotney Construction Law will be discussing whether or not builders’ risk covers unforeseen events like the COVID-19 pandemic, and what contractors should do if their insurance policies don’t cover COVID-19 losses. Fortunately, contractors are rarely without recourse even in uncertain times like these.
Generally, builders’ risk and other forms of contractor insurance don’t cover what are known as force majeure events — random “acts of God,” such as a hurricane, earthquake, or tornado. Therefore, most insurance policies won’t cover project suspension costs stemming from COVID-19. As reported by the Tampa Bay Times, “Many insurers … specifically excluded viral and bacterial infections from their business interruption policies after the SARS epidemic in the early 2000s.”
Furthermore, your contract could contain a right-of-loss provision that places responsibility for damage or destruction of work squarely on your shoulders until work is completed. For these reasons, it’s imperative that you consult a licensed insurance professional and a Fort Lauderdale construction attorney to confirm the contents of your insurance policy and contract, respectively.
What Should I Do If I’m Not Covered?
As mentioned, contractors are rarely out of options when it comes to situations like this, but that will be determined by the contract. Your contract could have a flow-down provision that shifts responsibilities from a general contractor to a subcontractor. Your contract could also contain a force majeure contract clause that would provide relief in the case of a force majeure event like the COVID-19 pandemic. Finally, common law can be looked at to determine if force majeure is implied by the contract language. There are solutions to your situation, whatever it may be, but only if you consult an experienced Fort Lauderdale construction attorney to review your contract and help you decide the best course of action.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.