If work stops, so may insurance

With supply chain issues causing much longer lead times for building materials, which creates further scheduling challenges, there’s a good chance that your project may be interrupted or delayed for a significant period of time. Builtin Insurance’s Ben Rickard cautions those in this scenario about potential insurance implications

As a general rule, insurers don’t like to cover buildings that are unoccupied and the same applies to building sites that are abandoned, or where work isn’t progressing.

The reason is that there is a higher risk of claims – and of those claims being more expensive. For example, issues such as a burst pipe or other flooding may go undetected for longer, making damage worse. Abandoned sites are also at greater risk of burglary and vandalism.

That’s why contract works insurance generally either automatically ceases after a period of stoppage, or excludes claims from events following a period where work has stopped on site.

Here are some examples of policy wording:

1. Stoppage of work

If work at the Contract Site effectively ceases for a period of sixty (60) consecutive days, all indemnity under this Policy shall cease at 4pm on that sixtieth (60th) day and the indemnity shall only be reinstated if the cessation of work is disclosed to Us and only from the date and to the extent which we subsequently advise in writing.

2. Losses not covered

This policy does not insure loss immediately preceded by total or partial stoppage of work for longer than 90 days.

What can you do?

This means that, if you know work is going to be delayed, you should make sure your insurer is aware of this, so you’re not caught out if something does happen. 

They may want to impose additional terms, such as a higher excess during the period and a requirement that the site is regularly visited until work starts up again, but at least you will be covered if something happens. 

If possible, you could reschedule the work so there are no extended periods where no-one is working on site to avoid falling under these stoppage exclusions. 

At the same time, you should also minimise the chances of a claim if there are going to be delays. For example: 

1. Properly secure materials from theft (either on or off site).

2. Make sure anything that shouldn’t be left exposed to the weather for any length of time is protected (there are exclusions for this too).

In a nutshell

Be aware of the consequences on your insurance cover of any extended periods of stoppage on the site, and either re-schedule or keep your insurer informed if this is likely.   

 

Builtin are New Zealand’s trade insurance experts. For more information visit www.builtininsurance.co.nz or contact Ben at ben@builtin.co.nz or 0800 BUILTIN