In Pennsylvania, construction is only able to continue for emergency repairs, construction of health care facilities, and for a select few companies that have been able to attain a waiver. In fact, Pennsylvania is the only state to shut down all active public and private construction sites.1
The result of the shutdown has left a lot of projects, such as residential houses, standing mid-construction. With the recent string of bad weather and high winds in Pennsylvania, a lot of builders and homeowners are at risk if the buildings are not insured. For example, new construction houses that have had asphalt shingle roofs installed over the recent colder months are at risk for shingles to be blown off because there has not been enough warm weather to help the shingles stick. This isn’t an issue if caught right away, but, if unnoticed and time passes, it can cause some serious issues.
Builder’s risk policies cover first-party risks of damage to construction projects, ground-up new structures or projects under construction, during construction. These policies cover the building itself as well as materials and supplies of others that are on a jobsite. The policy works much like the standard HO policy in terms of applicability of coverage as the policy will cover the policyholder for “direct physical loss” to covered property. However, unlike homeowner policies, there are no standardized policy forms for builder’s risk insurance because every construction project is different.
For those who already obtained a builder’s risk policy, it is important to review the policy and see if there is a delay in completion endorsement. This endorsement provides coverage including “soft costs” associated with delay. However, the coverage must be triggered by direct physical loss. Similar to what is being seen with homeowner policies in conjunction with Covid-19, you can expect some pushback from the insurance carrier regarding whether or not Covid-19 constitutes direct physical loss.
It should also be pointed out that there is a difference between builder’s risk insurance and contractor’s liability insurance. Contractor’s liability protects contractors if they are accused of causing injury or property damage. Builder’s risk covers more of the “Act of God” damage such as lightning or hail damage.
My wife, boys, and I were lucky enough that we had so little left with our construction that our builder was able to apply and receive a waiver to finish our home and close on April 3. It is hard seeing some of the news articles for the families that are not as lucky, such as the family involved in this story. The good news is that there is a proposed Bill in the Pennsylvania Senate that would allow construction activity to resume. Hopefully it is sooner rather than later.
1 “Coronavirus brings Pennsylvania’s Construction Industry to a Standstill” https://www.pennlive.com/life/2020/04/coronavirus-brings-pennsylvanias-construction-industry-to-a-near-standstill.html