How Occupancy Impacts Builders Risk Coverage

Hi, there. Spring is in the air. And for me, that means trying to finish what I started in January.

I promised myself I wouldn't go shopping again until I could see the back of my closet.

But with the weather changing, I really need some spring clothes. So I'm trying to get rid of clothes I haven't worn in years. But every time I just seem to pull an item out, ponder for a while and put it right back in the closet.

You know who doesn't have a problem finishing what they started? Builders.

Builders are completing project after project to get structures out of their inventory fast. But with all the hustle, some builders are permitting people and their property to occupy the space a little too early in the process.

What's the big deal with a little generosity? I'm going to walk you through the occupancy clause from both our builders risk coverage forms to show you how that can go wrong.

Our 40471 small coverage form includes a 90-day occupancy clause, unless a few conditions are met, and you'll see those on screen.

But let's paint a picture.

Imagine I'm a builder and you want to buy the house I just built. Your sister's kicking you out because you never put the cap back on the toothpaste. Out of the kindness of my heart, I let you move in prior to closing.

And I do not charge you rent.

As a builder, I still have 90 days of builders risk coverage. Keep in mind, there is no liability or contents coverage.

But if I charged rent, that builders risk coverage would be terminated.

So let's move on to the 40660 large commercial coverage form, which terminates coverage 60 days after the property is occupied in whole or in part, or put to its intended use.

Imagine this. I'm the contractor building a warehouse construction is mostly finished, so I allow the buyer to move in their product before the papers have been signed. Putting the warehouse to its intended use. That means the builders risk coverage would be terminated.

Make sure you talk about occupancy plans with your builders risk client before you put the policy in place and review the coverage terms with them. Trust me, that is not a conversation you want to have after a claim occurs.

Also, if you find out your client is planning to occupy or allow occupancy on their project, contact underwriting as soon as possible.

If they have the entire picture, it might be possible to obtain a permission to occupy endorsement while it isn't available on every type of risk. It's worth having the conversation.

So how can you get ahead of potential issues that could jeopardize your client's builders risk coverage? Check in as your contractors are finishing projects. Have a conversation. A few minutes spent on a quick call or meeting could save them a heck of a lot of trouble down the road.

All right. I got to get back to my closets. Maybe I should try that thing where you ask yourself, “does this item spark joy?” Got a feeling they all will.

‘Til next time.

This is intended as a general description of certain types of insurance and services available to qualified customers. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non-admitted basis. Product availability is subject to change.