The NJSCU member institution’s property insurance policy with FM Global includes coverage for Builder’s Risk/Course of Construction, as detailed in the policy. How coverage applies.
The interests of project contractors and subcontractors are included in the policy language. Unless otherwise prevented by the construction contracts used for the project in which all claims are identified as payable to the college/university, as is often the case, the contractor can be added as a Loss Payee. The contractor cannot be added as an Additional Insured, as this designation is only allowed under liability policies, and this insurance is a property insurance policy. The only Additional Insured that would be permitted under the policy with FM is if the project is a joint venture and/or if there is a co-owner.
NJSCU member institutions should report future projects requiring Builder’s Risk, as well as current projects as requiring Builder’s Risk on the Schedule of Values during the policy renewal process.
New requests for Builder’s Risk coverage are to be made using a Builder’s Risk Reporting Form, which is completed by the schools and submitted to the NJSCU Risk Manager.
If the project cost exceeds $50 Million, then additional underwriting review is required by FM Global, which may prompt additional questions. All projects, regardless of cost, will be reviewed for underwriting, and separate coverage placed as necessary. This will include potential project-specific deductibles or coverages as communicated with FM. Given the nature of the project, this may also result in adjustment to the Schedule of Values and associated premium charged. For example, replacement of an air handler may be a replace-in-kind that results in no change in replacement cost, whereas a change in use where a classroom is changed to a laboratory, which can add significant replacement cost. Similarly, if something is added that wasn’t there previously (e.g. central a/c), this may increase the value of the property.
What should be reported for Builder’s Risk: new construction; renovation and/or additions to existing buildings; and; asset renewal projects. These projects should also be submitted to FM Global for plan review.
What doesn’t need to be reported for Builder’s Risk: maintenance or repair projects. Please note that certain maintenance and repair activities may warrant review by FM Global. Please refer to FM Global Plan Review page for additional information.
When is it recommended to obtain separate coverage? Builder’s Risk coverage through FM Global is typically less expensive than the standalone market for this type of insurance. It may make sense to separately place the Builder’s Risk insurance if an Owner-Controlled Insurance Program (OCIP) is available/in use, or if waiver of subrogation issue cannot be resolved with a contractor.
NJSCU member institutions are strongly encouraged not to include mutual waiver of subrogation language in their construction contracts. It is recommended that all contracts inure to the benefit of the school, and that any waiver of subrogation be in favor of the school. The policy with FM Global requires the NJSCU member institutions to cooperate in any subrogation proceedings involving claims made on the policy.
What happens after a Builder’s Risk project is reported? The NJSCU Risk Manager shares the information with the FM Account Manager, who then shares internally with the FM Account Engineer, and others as necessary. This can prompt requests by FM for plan review or offering of additional engineering services, including attendance at project meetings, site visits, etc. If there are any increases in insurance values, this may result in additional premium being assessed.