How does a delay in completion endorsement work on a builder's risk policy?
California Subscriber
Several coverages are added to the builders risk project by use of the Delay in Completion Coverage endorsement IH 99 15.
Soft Costs coverage is triggered when a covered cause of loss causes a delay in the completion of construction operations. It provides coverage for actual and necessary soft costs the insured sustains as a delay in the completion of construction operations. "Soft costs" are defined as additional interest expense on money the insured borrows to finance construction or reconstruction; real estate or property taxes; advertising and promotional expense; insurance expenses; commissions, legal, and accounting costs and fees and administrative expenses incurred because of a necessary renegotiation of a lease or leases; architectural fees, building inspection, and permit fees and charges; storage charges; and survey costs. "Construction operations" means the "construction, erection or fabrication of the structure described in the Declarations."
Business income is available if the insured sustains an actual loss of income because of the delay in completion of operations, but this delay must be directly caused by a covered loss or damage. The business income coverage will only apply to the specific job site(s) covered as shown in the Declarations. The business income will be based on the net income before the direct loss or damage; the likely net income if there were not loss or damage (not including earned income as a result of an increase in operations due to unfavorable business conditions caused by the impact of the covered loss on customers or other businesses); the operating expenses, including payroll, that is necessary to resume operations with the same quality of service that existed before the direct loss or damage; and other relevant sources of information to justify income, such as financial records, bills and invoices, deeds, liens or contracts, and construction and project records.
There are two additional coverages: expense to reduce soft costs payment and expenses sustained resulting from action of civil authority that prohibits access to the described property because of direct physical loss to property other than the described property.
There is no coverage for soft costs expense because of delay due to strikers; suspension or cancellation or lapse of a license, lease, or contract; or costs to test for or monitor pollutants.
The limit of insurance is an occurrence limit as shown in the Declarations, unless there is a monthly aggregate of limit shown for soft costs, business income or loss rental value in the Declarations. If a monthly limit is shown then that is the most that will be paid if any consecutive thirty-day period once the period of delay starts. The period of delay begins on the date the project would have been completed if there were no loss, following any waiting period shown in the Declarations. The period of delay ends on the actual date the intended occupancy or operations of the job structure commences.
The insured must resume all or part of their operations as quickly as possible.
Loss determination is based on a review of relevant information such as the insured's financial records, deeds, contracts, and construction records and project progress reports.
If you have a specific claim situation that deals with the delay in completion endorsement, we will happy to review.