Builder’s risk insurance is offered as a way to protect a construction project while it’s still ongoing, but that doesn’t mean that collecting the benefits will be easy if a claim is necessary. These policies often contain technical language and very narrow terms, which can lead to challenges with having a claim covered.
Some insurance carriers accept the idea of a loss, but they argue that the specific circumstances of the case don’t qualify as a physical loss covered under the policy. Generally, these policies require a direct physical loss in order for a payment to be triggered.
What Might Trigger A Denial?
Denials on a builder’s risk claim can stem from many causes. One of these has to do with the differentiation between wear and tear and external damage. Insurers will often deny claims that appear to be the result of deterioration or ordinary aging, both of which are classified as wear and tear. This is much different than damage that occurs because of storms, collapses, water intrusion or similar factors, all of which are considered external damage.
Another common reason for denial is faulty workmanship exclusions. The insurer may claim that defective work is the reason for the denial, even though the damage should have been considered a separate result that would be treated differently based on policy wording.
What Costs Are Considered?
Costs are another area that often leads to confusion in these claims. Hard costs are the physical construction expenses, such as labor, materials and replacement, or repair work. There are also soft costs, which include the indirect losses, like interest or architectural fees, however you’d need to check the policy wording to see if these are covered by the policy as they aren’t always.
Denied builder’s risk claims can be challenging to fight, partly because of the technicalities located in the policy. Even if there is a legitimate claim filed, the builder may have to fight for the approval. Working with someone who’s familiar with these matters is beneficial since they can assist with the interpretation of the policy and determining how to move forward.
If your builder’s risk insurance claim has been delayed, denied, or underpaid, you may not be getting the coverage you’re entitled to. We help contractors and developers navigate complex insurance disputes and recover what their policies promise, contact our team today to review your policy and explore your options.