Summary: Several endorsements are available that modify coverage under the builders risk policy in various manners. These endorsements are discussed here: builders risk reporting form (CP 11 05); builders risk renovations (CP 11 13); separate or subcontractors interests (CP 11 14 or CP 11 15); and collapse during construction (CP 11 20).
Builders Risk Reporting Form
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
BUILDERS RISK REPORTING FORM
This endorsement modifies insurance provided under the following:
BUILDERS' RISK COVERAGE FORM
BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY
SCHEDULE*
Prem. Bldg. Actual Cash Value
No. No On Inception Date
A. When this endorsement is attached to the BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY CP 11 99 the term Coverage Part in this endorsement is replaced by the term Policy.
B. You must:
1. Within thirty days of the inception of the Coverage Part, select a day of the month on which reports of value will be effective.
2. Within thirty days of the effective date of the report of value, file with us a report each month of the actual cash value of the Covered Property.
C. If, at the time of loss:
1. You have failed to file with us reports of value as required, we will not pay more than the value stated in the last report filed before the loss.
2. You have not filed any reports, we will not pay more than the actual cash value as of the inception date of this Coverage Part.
D. Full Reporting. The NEED FOR ADEQUATE INSURANCE Additional Condition is replaced by the following:
We will not pay more for any loss than the proportion the values last reported before the loss bears to the actual cash value of the Covered Property on the effective date of the report.
E. We will not pay more than our Limit of Insurance even if the values reported exceed that limit.
F. Premium Adjustment
1. The initial premium for this insurance is based on the actual cash value of the Covered Property on the inception date of this Coverage Part.
2. For each report based on the change in values as shown in your report, we will:
a. Charge additional premium; or
b. Credit return premium.
3. The charge or credit will be for the period from the midpoint between the effective dates of the current and last previous report due to the expiration date of this Coverage Part.
* Information required to complete this Schedule, if not shown on this endorsement, will be shown in the Declarations.
Analysis
The builders risk reporting form, CP 11 05, may be attached to CP 00 20 and CP 11 99. The actual cash value of insurable property at the time it is brought on the premises is used to determine the initial premium. Note that this amount reflects the value at the beginning of the policy period—not the completed value of the building as on CP 00 20. This allows the insured to tie premium payments more closely to the values that are actually at risk.
The provisions of the builders risk reporting form require an insured to report the value of the property covered on a monthly basis. The insured must select a day of the month on which reports of value are effective; the selection made within thirty days of policy inception. Once a day is chosen, reports are due each month within thirty days of that day. (This could, in effect, give the insured sixty days to file the initial report.) Reports of value are submitted on form CP 11 06, builders risk premium adjustment form.
The policy is then endorsed to show the increase in value indicated by the report—the difference between the actual cash value at the current date and what it was a month before. An additional premium is charged for the reported increase for the unexpired term of the policy and is computed from the date midway between the dates of the current and preceding report.
The insured must report the full increase in value each month. A full reporting clause, the equivalent of a 100 percent coinsurance clause, limits the proportion of any loss that the last reported value before the loss bears to the actual cash value on the date for which the report was made. A penalty occurs if the insured fails to submit reports as required, since payment becomes no more than the actual cash value stated in the last report filed before the loss. A severe penalty is imposed if the insured has not filed any reports; in that case, the insurer pays no more than the actual cash value as of the endorsement's inception date.
The commercial lines manual (CLM) rules state that the minimum one year policy term of the builders risk policy may not be extended by endorsement when the reporting form is used.
Builders Risk Renovations
This endorsement modifies insurance provided under the following:
BUILDERS' RISK COVERAGE FORM
BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY
SCHEDULE
Prem. Bldg Actual Cash Value
No. No. On Inception Date
A. When this endorsement is attached to the BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY CP 11 99 the term Coverage Part in this endorsement is replaced by the term Policy.
B. COVERED PROPERTY is replaced by the following:
COVERED PROPERTY
Covered Property, as used in this Coverage Part, means the following type of property for which a Limit of Insurance is shown in the Declarations:
Renovations Under Construction, meaning the value of improvements, alterations or repairs to buildings or structures under renovation including:
1. The following property:
a. Fixtures and machinery;
b. Equipment used to service the building; and
c. Your building materials and supplies used for construction;
provided such property is intended to be permanently located in or on the building or structure described in the Declarations or within 100 feet of its premises.
2. If not covered by other insurance, temporary structures built or assembled on site, including cribbing, scaffolding and construction forms.
C. The following is added to PROPERTY NOT COVERED:
Covered Property does not include the value of buildings or structures existing prior to construction of the improvements, alterations or repairs.
D. In the application of the NEED FOR ADEQUATE INSURANCE Additional Condition, the value of the building or structure will include only the improvements, alterations or repairs at the described premises.
E. Subparagraph e. of the WHEN COVERAGE CEASES Additional Condition does not apply.
F. Loss Payable Clause
For Covered Property in which both you and a Loss Payee shown in the Schedule or in the Declarations have an insurable interest, we will:
1. Adjust losses with you; and
2. Pay any claim for loss or damage jointly to you and the Loss Payee, as interests may appear.
Analysis
Addition of CP 11 13, builders risk renovations, to the builders risk coverage form and policy, modifies the definition of covered property from buildings under construction to renovations under construction. (The builders risk reporting form, CP 11 05, may also be attached, in which case its provisions also apply to the renovations.)
Renovations are defined as improvements, alterations, and repairs to buildings or structures. As with CP 00 20, coverage applies to items intended to become a permanent part of the renovated building (if located in or on the building or within 100 feet of its premises) such as fixtures, machinery and equipment used to service the building, and the insured's building materials and supplies. Temporary structures that are built or assembled on site, including cribbing, scaffolding, and construction forms, are also covered if they are not covered by other insurance.
If the building owner is also insured under a builders risk policy for renovations, the property's increased value during the course of renovation will not affect the insured's coinsurance. Forms CP 00 10 (building and personal property coverage form) and CP 00 17 (condominium association coverage form) state that “additions under construction, alterations and repairs to the building or structure” are covered only if not covered by other insurance. However, if the contractor has a builders risk policy covering the value of renovations, this does not stand as other insurance for purposes of the owner's coverage. Thus, the owner's coinsurance values will be adversely affected by renovation, a problem that can be handled by attaching endorsement CP 14 20 to either property form. This endorsement makes the value of improvements, alterations or repairs property not covered under the owner's building policy. (Sample wording for the exclusion may be found in the building coverage rules in the commercial lines manual.)
Interests of the building owner, the contractor, or both jointly may be handled through the issuance of CP 11 13. A loss payable clause is included on the form specifying how losses are handled when a scheduled loss payee—building owner, contractor, or other interest—applies.
Provisions under coverage form CP 00 20 concerning the cessation of coverage apply, with the exception of subparagraph e. Thus, coverage under endorsement CP 11 13 ceases when (1) the policy expires or is cancelled; (2) the property is accepted by the purchaser; (3) the insured's interest in the property ceases; or (4) the insured abandons construction, with no intention of completing it. Subparagraph e., which is inapplicable, concerns cessation of coverage ninety days after construction is complete or when the building is occupied in whole or in part or put to its intended use, since use or occupation of the portion not being renovated is common in buildings undergoing renovation.
Separate or Subcontractors Exclusion
BUILDERS' RISK – SEPARATE OR SUB-CONTRACTOR'S EXCLUSION
This endorsement modifies insurance provided under the following:
BUILDERS' RISK COVERAGE FORM
BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY
SCHEDULE
Prem. Bldg. Actual Cash Value
No. No. On Inception Date
A. The following is added to PROPERTY NOT COVERED:
Covered Property does not include the value of the installation made by the Contractor at the location shown in the Schedule or in the Declarations, including:
1. Labor;
2. Materials; and
3. Supplies.
B. In the application of the NEED FOR ADEQUATE INSURANCE Additional Condition, the value of the building or structure will not include the Installation described in the Schedule or in the Declarations.
Analysis
It is possible to exclude the value of installations made by specific contractors, including their labor, materials, and supplies. This is done by adding CP 11 14, a builders risk-separate or subcontractors exclusion endorsement to the coverage form.
Separate or Subcontractors Coverage
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
BUILDERS RISK – SEPARATE OR SUB-CONTRACTORS COVERAGE
This endorsement modifies insurance provided under the following:
BUILDERS' RISK COVERAGE FORM
BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY
SCHEDULE
Prem. Bldg. Actual Cash Value
No. No. On Inception Date
A. When this endorsement is attached to the BUILDERS' RISK CHANGES – STANDARD PROPERTY POLICY CP 11 99 the term Coverage Part in this endorsement is replaced by the term Policy.
B. COVERED PROPERTY is replaced by the following:
COVERED PROPERTY
Covered Property, as used in this Coverage Part, means the following when a Limit of Insurance is shown in the Declarations:
Installation Under Construction, meaning the Installation, in the course of construction, made by the Contractor at the location shown in the Schedule or in the Declarations, including:
1. Labor;
2. Materials; and
3. Supplies.
C. In the application of the NEED FOR ADEQUATE INSURANCE Additional Condition, the value of the building or structure will include only the Installation described in the Schedule or in the Declarations.
Analysis
If, through the terms of a construction contract, an insured must provide coverage for the interests of a separate or sub-contractor, a CP 00 20 builders risk coverage form may be issued with a CP 11 15, builders risk-separate or sub-contractor's coverage endorsement. Covered property becomes the installation under construction of the contractor and includes labor, materials, and supplies. The limit of insurance is based on the completed value of the specific installation in question.
Collapse during Construction
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
BUILDERS RISK – COLLAPSE DURING CONSTRUCTION
This endorsement modifies insurance provided under the following:
BUILDERS' RISK COVERAGE FORM
A. The RESTRICTION OF ADDITIONAL COVERAGE – COLLAPSE ADDITIONAL CONDITION does not apply.
B. ADDITIONAL COVERAGE – COLLAPSE
Paragraph C.1.b.(6) in the Causes of Loss – Broad Form and paragraph D.2.f. in the Causes of Loss – Special Form are replaced by the following:
Use of defective material or methods, or faulty design, plans, specifications or workmanship, in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.
Analysis
When either the broad or special causes of loss forms are attached to the builders risk coverage form, coverage for collapse is available as one of the additional coverages. One of the provisions of that collapse coverage covers collapse losses due to defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.
The 1988 edition of the builders risk coverage form eliminated this portion of the collapse coverage and reduced the rates applying to the broad and special causes of loss forms to reflect the reduced coverage. The current edition of form CP 00 20 restricts collapse coverage in the same way. Insureds may purchase coverage for collapse due to defective material or methods through endorsement CP 11 20, collapse during construction. This endorsement also adds coverage for collapse losses that occur during the course of construction due to faulty design, plans, specifications or workmanship.
The charge for the endorsement reflects the assumption of the heavy errors and omissions exposure of insureds or additional insureds who are architects, engineers, contractors, subcontractors, or building owners who have waived subrogation rights against any of these.
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