The Expert Podcast

Look if you're a builder or contractor it's not just your client that has to deal with the supply chain issues and the higher prices even though you pass it along as a cost plus or a margin on your contract . You probably have higher costs as well or will have very soon . And this is a great article from the insurance industry . Where we have some some involvement We own it in a commercial insurance agency . Where construction projects . Are having issues with coverage . And this is supply chain challenges and inflationary pressures have left contractors and developers with soaring insurance costs . Amid a scramble to extend cover for delayed projects . So here's what happens . You start a development project . And you get a . Policy the cover that project builders risk . General liability Eno whatever it is maybe multiple policies . And it's based on the contract amount of that . Particular development . And as the project . proceeds . You're going to find that there may be increased costs maybe there's delays because you can't get labor . Maybe the permits are taking longer . Maybe the materials aren't available . Now your policy may have an expiration date . The dollar amount may now exceed the policy . And your policy doesn't fit . The footprint of that project anymore . And you have to go back to your insurer and you might think well it's just a small thing to get an endorsement or extension of cover . But you may find that . The insurer , the insurance company behind it . May have other plans what's happens Well if you bought a policy a year ago , You're getting hit with delays . You're going to have to extend that policy which increases the cost One of the things that says some carriers are not willing to extend past a certain amount date or money . It's going to put you in a bind . If you're in the middle of a project . And your insurer won't extend You have to write a new policy . With a different carrier . Which now they're going to rerate and underwrite the entire policy . And don't blame your insurance company They have to get reinsurance from another carrier to kind of back them up . And they're facing difficulties acquiring that re-insurance . Those reinsurance companies They're seeing what's happening in the marketplace too They know that their supply chain issues that there are labor issues that there are lumber price issues . And if it goes beyond a certain day or certain amount , it kind of rewrites the whole project Typically Policies are underwritten for you know 12 18 or 24 months And if it goes beyond that , Then allocating more to that risk sometimes puts the policy in a different category . That you might be priced out of You might not be able to pass that along to your . Customer because your contract may have provisions in it for materials . Increases and delays but it probably doesn't have the ability for you to pass along additional insurance costs . The worst thing is to not realize that at all , If you don't recognize that your policy has a limit on it and you go past the date that your policy . specifies for completion date , you might be bare or without insurance and not even knowing We've had clients that we've seen . That their policy only insured up to a certain dollar amount . Let's say you know , $2 million project . And their project now got bumped up because my . costs went up delays , labor costs . Now it's maybe a $2.7 million project . Okay . Even if the client . Accepts those price increases . Maybe you absorbed some of it internally the client pay some of it . If your policy only covers you for 2 million and now you're at 2.7 . If you have a . Defect in workmanship . Builder's risks . Damage theft of materials . You may find that not only are you not covered on under that extra 700,000 . If it's over that amount it may trigger that the policy now . Is no longer effective because your representations on the dollar amount . We're lower . And you might say well just cover me up to the 2 million . Well what happens is insurance companies rate a project based on the total . Dollar amount . 2.7 million project might be beyond a threshold that makes it a more complicated . Project where they have to do additional underwriting . So if you breach that threshold , your entire policy might be void . So check with your carrier . As you're doing your project If you have to do an extension of time or to increase or rerating of your contract with your client , make sure you're also going back to your insurer or your broker . To make sure you don't have to make any changes . To that . Underlying policy also , if you're making any change . to the project itself to try to reduce costs . Maybe you're changing some of the engineering or architecture . Make sure the insurer . Covers that because they may have covered it with , because you have a steel beam . If you switch it to , you know a timber beam . That may not be covered So check with your insurer Anytime there's a major change to your construction project . To make sure you still have coverage . For liability or damages down the road Oh yeah One more thing . Don't forget Workman's comp . Your work comp policy may also have some triggers that can be breached with more time . More complexity or . A higher price of the contract .