The facts
Mike, a general contractor, was overseeing the construction of a new home in a wildfire-prone area. He chose not to purchase a builders risk policy, assuming the risk was low and that any damage would be covered under his general liability policy. When a wildfire broke out nearby, it caused extensive damage to the partially completed structure, including charring of the framing and destruction of exterior materials.
With no builders risk insurance in place, Mike’s company had to pay all repair and replacement costs out-of-pocket. The fire also caused a delay in construction because the site needed to be cleared and inspected before work could continue.
The result
Mike’s company faced significant out-of-pocket expenses to fix the wildfire damage. The delay pushed back the project timeline, creating scheduling challenges and extra costs for labor, equipment, and financing, all of which Mike's company had to cover.
Risk factors
Risk factor #1
This scenario shows the serious financial risk builders face without a builders risk policy. Without coverage, all damage and delay-related costs fall directly on the builder.
Risk factor #2
Builders should work closely with their insurance agents to secure adequate builders risk coverage before starting construction. This proactive step helps protect against costly wildfire damage and project delays, ensuring financial stability throughout the build.
The claim scenario is strictly documented for illustrative purposes only and provides an example of what a policy could cover. It is intended to provide a general overview of the program described. Please remember only the insurance policy can give actual terms, coverage, amounts, conditions and exclusions. Program availability and coverage are subject to individual underwriting criteria.
