RiskProNet News


Insuring the Property of Others When It’s In a Client’s Care

Rolls of carpet, ready to be installed on Monday, were delivered to the contractor’s premises on Friday. They were stolen over the weekend.

Determining who has the insurable interest in such a situation can be problematic, participants in this month’s Construction Practice Group teleconference agreed. If the customer has paid for the property, the insurable interest may belong the customer. Or it could be the contractor, because the property is in the contractor’s care. It’s also possible that the contract has language covering the insurable interest.

Under the Uniform Commercial Code, which can vary from state to state, the fact that the customer has paid for the carpet does not necessarily indicate the customer is responsible for insuring it. In many situations, the seller is responsible for risk for loss to goods until the customer receives the goods. If a third party is storing the goods, it may be difficult to resolve the issue in the absence of specific language.

Coverage options in this situation could include the property policy, the builders risk policy or the installation floater, Sonya Moore of Eustis Insurance and Benefits told the group.

In determining whether coverage should come under the property policy vs. the builders risk policy, Moore listed these considerations:

  • Is new construction as covered property included in the definition of building?
  • Is the sublimit for “newly constructed buildings” sufficient for the period of construction?
  • Is the time limit for automatic coverage for “newly constructed buildings” for a limited coverage period, such as 30 days?
  • Will the property insurer extend coverage beyond the automatic coverage period?
  • If the property insurer will not extend coverage after the automatic coverage period, would you be able to find a builders risk insurer to insure new construction that has already started? This is unlikely.
  • How are materials for the new building covered, and are there any overly restrictive distance limitations on storage sites?
  • Will the property insurer provide time element coverage and other soft costs if requested by the owner?
  • Will the general contractor and subcontractors be additional insureds or simply loss payees for their construction exposures?
  • Does the insurer have the technical ability to provide specific loss control services for new construction, such as plan review?
  • Is the premium (including deductible) competitive when compared to a builders risk insurer?

The accompanying PowerPoint for this discussion is available from RiskProNet Executive Director Gary Normington at gnormington@riskpronet.com. The next post will look at special considerations in insuring the property of others.