Life, Health, Auto, Home Insurance

Permission to Occupy Builders Risk Property Coverage Mistakes

Brokers strive to do a great job for their clients, but sometimes they overlook certain coverages. This could lead to a “do not recommend” claim. And greater liability for the agent or broker in case of a loss.

During a webinar for associations of independent agents representing Delaware, Maryland and Pennsylvania. Education consultant Jerry Milton, CIC, detailed occupy builders risk property coverage that intermediaries can ignore for proprietary clients.

Permission to Occupy Builders Risk

Permission to Occupy Builders Risk
Permission to Occupy Builders Risk

Error 1: not adequately cover improvements and improvements, for tenants
Milton explains that the improvements and improvements. Although made at the expense of the tenant, become part of the building. The improvements are included in the definition of “construction” in the owner’s commercial property policy and are also included in the definition of “personal commercial property” in the tenant’s policy.

Who insures? Because the improvements are generally attached to the property and increase the value of the building. Milton recommends that the owner increase their insurance to cover those improvements.

Error 2: not inform the insured about the occupation.

Vacancy problems with the builder’s risk policies

“Occupation in whole or in part nullifies politics,” says Milton, but building owners do not like empty buildings. Carriers can give the insured permission to occupy parts of the building as construction is completed, moving floor by floor, with an endorsement and an additional premium. But this approval is generally only valid for 90 days. And may need to be renewed as construction is completed.

A related issue is the question of the vacancy. If the building has less than 31% occupancy for usual operations. It is considered vacant, explains Milton. In current economic times, tenants can move out leaving a building with less than 31% occupancy, but still partially rented. The broker renews the policy without knowing whether the building is fully occupied or not. However, if the building is considered vacant for more than 60 days, the owner will lose coverage. In that case, it is possible that the policy does not pay for any loss caused by vandalism or sprinkler leakage. For example, and other covered losses are reduced by 15%.

Error 3: not insuring 100% of the value and requesting an agreed value

A building with a value of $ 1 million could be subject to an 80% coinsurance, for example. Which would lead to a limit of $ 800,000. What happens at the time of the loss if the building has a real value of $ 1.2 million due to improvements and additions? The owner of the building is out of $ 200,000.

Milton’s advice: “Always press for a value of 100% and request an agreed value. Which will suspend the coinsurance.”

Mistake 4: Allowing a tenant to secure a building

If the tenant is the named insured and the owner of the building is added as an additional insured. Milton says that the owner could be excluded for any loss if the tenant, its partners, members, officers or managers commit a dishonest act. Such as arson . Such acts may leave the building owner without coverage.

It’s much better, says Milton, for the owner of the building to carry the insurance and incorporate it into the tenant’s rent.

Mistake 5: Do not recommend construction glass coverage.

In general, a tenant is responsible for any broken glass in the building, says Milton. But the tenant’s commercial property policy that covers commercial property does not include building elements, such as glass. Even though the owner insures the building. It is important that the agent recommend a construction glass endorsement to the tenant’s policy.