Builders risk policies for large projects can be complex and the scope of loss stemming from them can be difficult to measure. But what if a loss causes damage to property that pushes back the date of completion for the project? There could be coverage under the delay in completion policy form or endorsement.
Delay in Completion coverage provides risk transfer for large projects that have significant exposures of anticipated large operational revenue streams, significant project construction financing (debt or equity) for which debt service terms are preset and locked, and extra expense/overhead costs for loss of expected use.
Typical policy forms require any delay in completion to be caused by direct physical loss or direct physical damage to Insured Property. “Delay” may be defined as “the period of time between the Scheduled Date of Completion, as stated in the Declarations, and the actual date on which commercial operations or use and occupancy commenced or should have commenced.”
The indemnity period is the period during which the use of the property is impaired by a delay in start-up/completion due to loss or damage. This begins on the date on which business would have commenced, if not for the loss. The indemnity period is limited by the agreed maximum indemnity period. The basis for determining the indemnity period is the time needed to remedy the delay loss.
Some losses causing delay in completion may not be covered, such as:
- Redesigning, or rectifying defects or faults;
- Inadequate funding to complete the project; or
- Claims resulting from fines, damages for breach of contract and other penalties.
This coverage is important to have as the losses that stem from them can be significant and complex. Should you have questions about this important coverage or a loss for which you may be entitled to coverage, contact experienced counsel.