Claim Stories: Anticipated Completion Date Change

Claim Stories: Anticipated Completion Date Change Without Notice

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5 min

Tell us about this project.

So, the agent secured a new construction commercial policy for apartments that were frame construction. It was $15 million, and it was modular. Modular construction is a faster pace of construction type. So picture cubes. And they'll bring in all these cubes and they stack them. And that's how they get their multi story. Each cube is manufactured with a water-resistant cover all the way around it to keep the water out.

What happened to result in a claim?

So, a major storm with wind and rain came through and it blew away, damaged and tore the protective coverings that were on these modular units, which allowed water to intrude in all of them. Every one of the units were damaged. It's a big claim. It estimated to be of about $1 million on it.

What did the adjuster discover?

Well, the adjuster caught that the application showed the anticipated completion date was July. When they received the information from the insured for the documentation, they were two months ahead of schedule. So they were only days away from opening and allowing the apartments to be turned over to the owner and start being occupied and rented.

What was the outcome?

The claim was found to be that they could pay off the million dollars in hard cost damage. Remember the damage to the modular units that was from water damage? They were able to pay that, but they could not trigger any soft cost coverage from delay. The two months they were ahead, it put them out two months to get it fixed, which now put them back on track for their anticipated completion date.

Had they been on time and it delayed them for two months, they would have been paid for the soft costs less the deductible. But, because they were ahead of schedule and it only delayed two months and they were two months ahead, we couldn't trigger the coverage for that.

What did the agent get right?

The application was filled out correctly. The anticipated completion date was the date provided by the insured, and it was confirmed by their contract that that's when they planned on being completed. It was signed, so: great for the agent. We had a signed application, that also protects them. Everything on the app looked right. There's no way the agent could have determined that the insured was going to be ahead, but with modular construction, it could be that this project moves up faster and they're going to be done sooner than what they anticipated.

What should have been done differently?

So what I would suggest to agents, any time they have any policy written, and you've got the anticipated completion date where you've got loss of business income or rents or you have soft costs. That is determined off that anticipated completion date. Just let the insurance know to notify you when there's a change, whether it's going to be later or it's going to be earlier.

Keep that date up to date, so their coverage always triggers properly for delay. It is not hard to get our dates changed on anticipated completion date. For the policies secured online, you can do it by a blank endorsement and ask that the anticipated completion date be changed to this date. On a large commercial, you go back to your underwriter and the underwriter can do that anticipated completion date.

Final thoughts?

Always go through your major parts of your policy conditions that apply to your insured’s project. So where there's no surprises for them, but also allows you time to tell your insureds to go ahead and provide you with additional information if anything changes during the progress of the construction.

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