AAIS Introduces New Policies for Builders’ Risk, Installation Floaters

October 12, 2010

A national property/casualty advisory organization has developed several new policy forms insurers can use for writing the builders’ risk and installation floater classes of inland marine insurance.

The American Association of Insurance Services (AAIS) has released several new coverage forms for those classes, plus a comprehensive revision of its existing installation floater forms, in the AAIS Inland Marine Guide, a resource of forms, rating procedures, and underwriting guidelines for the traditionally nonfiled classes.

“Builders’ risk” refers to property insurance for structures under construction; “installation floater” refers to property insurance for property being installed at locations, including fixtures and equipment.

The revision of the Guide’s Installation Floater section includes:

  • A new base form that combines unscheduled coverage for the insured’s projects with scheduled coverage for contractors’ equipment used by the insured;
  • An equipment breakdown and testing coverage endorsement that provides comprehensive coverage for major and minor equipment breakdown losses; and
  • A “delay in completion” endorsement that incorporates an important distinction between “additional installation expenses” and “additional soft costs.”

That distinction between installation and soft costs, modeled after language first developed for the AAIS Builder’s Risk forms, responds to a long-running issue concerning the insurance of additional costs incurred when a construction project is delayed by an insured loss. Under the AAIS delay in completion form, additional installation expenses include one-time added costs, such as design, financing, and permit fees, which are subject to a dollar deductible. Soft costs include recurring costs, such as interest payments and property taxes, subject to a time deductible.

Also among the new forms are two endorsements that introduce new types of coverage in Guide’s Builders’ Risk section:

  • “Blueprints and Construction Documents Coverage,” similar to traditional inland marine coverage for “valuable papers,” but focused on construction-related documents, providing coverage for loss to documents while away from an office, and coveing loss to models of projects; and
  • “Claim Preparation Expense Coverage,” which pays for certain expenses incurred by an insured at the insurer’s request (for inventories, appraisals, and other services) for purposes of determining the cost or extent of a covered loss.

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