Named Insured on Builders Risk Policy Entitled to Total Value of Loss

June 30, 2014

If the named insured on an inland marine builders risk policy is only the owner of the project, in the event of a loss, would the owner receive the total value of the loss? What if the owner has not yet paid the contractors for all of their work? Would the owner receive only the portion of the loss for which he has paid for or his insurable interest? Would it make a difference if the construction contract specifically required the owner to insure the building during the course of construction? Would this give the owner total insurable interest?

Hawaii Subscriber

This answer is based on the ISO Commercial Inland Marine Builders Risk Form, IH 00 70, which covers the building materials, supplies, fixtures, machinery, and equipment to service the building. Foundations while in the course of construction and temporary structures assembled or built on site are also covered. In our opinion, the insured would receive the total value of the loss (up to policy limits). The insured would still be responsible for any outstanding amounts due to the contractors, but the total value of the insured loss should still be paid to the insured.