Risk Management Advisories
CONSTRUCTION PROJECTS - INSURANCE AND REPORTING
- LIABILITY INSURANCE
- PROPERTY INSURANCE ( BUILDER’S RISK)
- REPORTING CONSTRUCTION ACTIVITIES
- RISK MANAGEMENT
When a building is in the course of construction or renovation, there
are exposures that must be insured to prevent financial loss. Insurance
requirements are generally set out in the Construction Tender Document. Two
key elements are:
- The risk of being held legally liable for bodily injury or damage to property
of others arising out of a construction activity.
- The risk of damage to the building itself while it is in the course of construction
or renovation.
LIABILITY INSURANCE
A wrap-up liability policy is the preferred policy form for most construction
projects. This policy is designed to protect all of the parties involved in
the project. The coverage is available through the general insurance market
and may be placed by either the contractor or the school board.
In smaller construction activities, such as renovations, the school board should
ensure that the contractor carries general liability insurance to protect the
contractor, any sub-contractors and the school board as an additional insured.
School boards utilizing their own employees to perform construction or renovation
work such as erecting portables, making small additions to existing buildings
or making internal renovations are protected against legal liability claims
as are their employees engaged in the construction work.
In all cases, OSBIE's liability policy protects the school board and its employees
for claims arising out of construction projects subject to any other insurance
available to the school board.
It is not the intention nor policy of OSBIE to extend or provide general liability
and/or errors and omissions and/or professional liability or any other type
of liability insurance protection to contractors, sub-contractors, engineers,
architects, surveyors, or to any other parties contracted for the project.
PROPERTY INSURANCE ( BUILDER’S RISK)
Builder's Risk is specialized property insurance for construction projects.
It protects the construction project and building materials against damages
caused by property perils such as fire, windstorm, vandalism, etc. The amount
of coverage should be no less than the value of the construction project. Coverage
may include the value of an existing building, in the case of an addition, especially
when the contractor has possession of the entire building. The coverage should
be in effect for the entire period of construction, and should include the school
board as an Insured.
School boards should receive copies of the contractor's insurance to ensure
that both liability and Builder's Risk coverages are in effect; that the board
is named as an Insured; and that the amount of coverage is adequate.
In some cases, the owner (school board) may decide to carry the Builder's Risk
coverage. In these cases, OSBIE will provide coverage, upon receipt of an amended
Tender Contract that shows that the owner is required to carry Builder's Risk
and a completed Property Change Form that provides details of the project. It
is, however, recommended, from a risk management perspective, that the board
allow the contractor to carry all insurance coverage, especially stand-alone
new structures, or additions and/or major renovations where the contractor has
control of the existing building. Transferring risk is a pro-active risk management
tactic, especially for high-risk exposures like construction projects.
REPORTING CONSTRUCTION ACTIVITIES
The OSBIE property policy includes a Reporting Requirement for Buildings Newly
Acquired or Under Construction. For a newly acquired building or construction
project valued over $100,000 to be insured, it must be reported to OSBIE within
90 days of acquisition or the beginning of construction.
In the case of construction projects, school boards should notify OSBIE at
or before the contract is awarded - whether or not OSBIE is providing the Builder's
Risk coverage. OSBIE provides excess coverage in the event that the Builder's
Risk coverage is inadequate. This provides added protection for the school board.
OSBIE has an obligation to report all newly acquired properties and construction
projects to its reinsurers in a timely fashion in order to arrange for reinsurance
to protect the interests of all OSBIE property Subscribers.
Reporting is to be done on the OSBIE Property Change Form (copy attached) which
can be faxed to OSBIE.
RISK MANAGEMENT
School board staff should ensure that the contractor's insurance certificates
are received and checked prior to the start of construction. OSBIE should receive
a copy of the contractor's Builder's Risk Certificate with the Property Change
Form notifying us about the construction project. We will review the certificate
to ensure it protects the school board.
Tender Contracts should set out clearly the contractor's obligations with respect
to security of the construction site, such as fencing, patrols, etc. Construction
projects are high-risk targets of vandals and are liability hazards. Attention
to the security of the site, both from a property and liability perspective,
is good risk management.
OSBIE's property reinsurer, Factory Mutual, provides a range of engineering
services to OSBIE members. They can review your construction plans, sprinkler
drawings, etc. at the design stage and make recommendations related to building
security, fire protection, and human element issues. These recommendations can
be incorporated cost effectively at the design stage.
Also, Factory Mutual engineers will inspect some construction sites during
construction. The Factory Mutual "hot work" and "red tag"
programs are examples of pro-active risk management programs that should be
part of all construction or renovation projects.
The engineering services of our reinsurers are part of the risk management
services included in your property premium. Take advantage of this service!
It may result in savings now, and prevent future claims.
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