An Administrator's Guide to California Private School Law

Chapter 17 – Construction

builder’s risk policies terminate coverage as to portions of the project when the school takes beneficial occupancy of those portions. If a fire occurs after the school takes beneficial occupancy of portions of the building, but before the school has taken out its own fire insurance coverage, the builder’s risk policy may not cover the damage due to fire. If a school chooses to accept the fire insurance coverage under the builder’s risk policy, it should make sure that the builder’s risk policy provides the school with the same scope and amount of coverage as a fire insurance policy. Further, the school should make sure that upon occupying any portion of a project, or the happening of the events that terminate coverage under the builder’s risk policy, the school procures its own insurance coverage.

 Course-of-Construction or Builder’s Risk Policy : This policy covers the risk of loss or damage to work during construction and prior to completion of the work. It reimburses the school or any other party with an insurable interest, for the loss, damage, or destruction of the work under construction, regardless of fault.

Unlike the CGL policy, there is no standard form for the builder’s risk policy. Each insurance company will generally have its own form. Given the many different forms that are utilized, the school should carefully consider the coverage to be required and review the builder’s risk policy before work commences on a project. The areas that the school should consider include:

 Scope of Coverage: Most builder’s risk policies cover the structure under construction, and equipment and materials installed during construction. They do not generally cover materials or equipment in storage or in transit. Coverage for this risk is available and should be required when large quantities of materials and equipment will be stored on the project site or other school premises for the project.  Commencement and Termination of Coverage: Builder’s risk policy forms normally establish when coverage begins and terminates, but these provisions are often vague. Unless the school has carefully reviewed the termination provision, coverage under the builder’s risk policy may terminate without the school’s knowledge and without the school having procured alternative insurance coverage on the occupied or completed portions of the project. To avoid this problem, the school should procure its own property insurance on any structure or property before the school occupies it. And if there is any doubt as to whether coverage exists under the builder’s risk policy, the school should obtain written confirmation or clarification from the insurance company that issued the policy.  Amount of Coverage: A builder’s risk policy generally sets forth the maximum amount of coverage. The school should ensure coverage is sufficient to reconstruct or replace the buildings or structures under construction.  Additional Insured: The school and any other persons or entities that have an interest in the structures or buildings being constructed should be named as insureds or additional insureds on the builder’s risk policy.

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 568