Should the Contractor or the Homeowner Purchase the Builders Risk Policy?

A common misunderstanding that contractors have is to think that their Liability Insurance covers the building materials when they are working on a project.  General Commercial Liability (CGL) covers exactly what its name implies; the contractors liability if someone in injured and the contractor is held liable.  contractors-150x150

Building materials in the midst of construction or on site are NOT covered by a CGL.  To cover the building materials in the midst of construction or on site, it must first be established who actually owns those building materials, the contractor or the homeowner.

The contract between the builder and the homeowner should specify who actually owns those materials.  If the contract fails to address the ownership of the building materials, at a minimum a verbal understanding should be established.

The party who owns those building materials is the party that is responsible for purchasing the builders risk insurance.

th7JGJ1NLCThe builders risk policy should then cover all of the building materials on site and in the midst of construction until the project is completed.  If set up properly this policy would cover the material for damage due to storms, fire, theft, vandalism, and other perils that will be named in the policy.

Some Business Owner Policies (BOP) held by contractors may include some coverage for building material.  Often times these coverages are insufficient for different types of projects.  If a contractors has a BOP that offers some building material coverage, the homeowner should request to see a copy of that policy, and then verify that the builders has enough coverage for their specific project.

 

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