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Monthly Archives: September 2019

Builders Risk: Minimizing Uncertainty at Bid Time

At the bid preparation stage, contractors often do not have full information on the builders risk insurance that will be provided by the project owner. The insurance requirements may be unclear or missing altogether. This often results in misunderstandings down the road. But it does not have to be that way.

The clarity and completeness of builders risk insurance requirements can and do vary considerably. I have encountered bid documents that do not contain builders risk requirements at all. I have also seen builders risk insurance addressed by a single sentence. These are actual examples:

  • “Owner will provide builders risk coverage.”
  • “The Owner shall provide property insurance upon the Work, but Contractor is responsible for all deductibles and uninsured losses.”
  • “Intentionally left blank.”

These examples all have one thing in common: The contractors are left to speculate on what, if any, coverage will be provided to them in the event of damage to the project. This is not a good way to start a project.

On the other hand, the insurance requirements may be complete and each contractor knows what risks are transferred to the builders risk insurer. This removes uncertainty … and any time you remove uncertainty, bid pricing is more favorable for the project owner. (Owners, please take heed.)

Why Aren’t Insurance Requirements Clear?

Insurance requirements may not be clear for two reasons. First, if model contract forms are used (e.g., American Institute of Architects, ConsensusDocs, Engineers Joint Contracts Documents Committee, Design-Build Institute of America), the builders risk provisions may be unclear or lacking to begin with. Many people assume that if a provision is contained in a model contract form, it must be appropriate. This is not true. Depending on circumstances, some provisions may be inappropriate. Other important loss exposures may not be addressed at all.1

For example, the standard builders risk insurance requirement in one model contract form requires coverage on an “all risks” basis. This is desirable, but in the section that lists the causes of loss that must be covered, there is no reference to ensuing loss exceptions. Many say that the most commonly litigated provisions in builders risk policies are the exclusions applicable to faulty design, workmanship, and materials. The breadth of coverage is very different between a policy that has these exclusions and another that has these exclusions followed by ” … unless direct physical loss or damage by an insured cause of loss ensue and then this policy insures only such ensuing loss or damage.” The latter example has an ensuing loss provision, which is very beneficial to all those entities insured by a builders risk policy.

The second reason for unclear insurance requirements is that the drafter may not have the technical or practical experience necessary to properly structure the requirements. We have all reviewed insurance provisions that are poorly conceived and executed. Enough said.

What Can Contractors Do?

The construction bid process generally provides opportunities for a contractor to obtain clarifications or answers to questions. These are set forth in the bid documents and may include pre-bid meetings or procedures for submitting questions. With private work, a contractor may also qualify its bid to include certain assumptions regarding insurance.

Many contractors wisely seek additional information and answers to their questions. Others may know there are potential problems but hope for the best, and still others are not aware of the issues.

Checklist Tool

It is suggested that contractors compile a builders risk insurance checklist and request the owner to confirm what is contemplated/provided by the builders risk policy. A sample checklist is reproduced below. This template should be customized by the contractor to suit its needs. Regular use of a checklist can minimize uncertainty for all parties and further risk management programs.

Coverage or Feature Minimum Requirement/Comments
1 Owner Responsibilities
Insurer selection AM Best “A X” or better
Naming of insureds Owner, general contractor, subcontractors of all tiers
Premiums and deductibles Owner is responsible
Policy format Inland marine policy and forms
Provide copy of policy Within 60 days of project start
Policy term In compliance with the contract
Partial occupancy prior to project completion Secure approval of insurer
2 Covered Property Replacement cost; no coinsurance
Work at project site Full contract value and modifications; owner’s supplied property
Property in transit Limits to be agreed upon
Property at off-site locations Limits to be agreed upon
3 Covered Causes of Loss/Other Features
“All risks” Full policy limit
Wind Full policy limit
Collapse Full policy limit
Water damage (incl. sewer backup and sprinkler leakage Full policy limit
Collapse Full policy limit
Faulty design, workmanship, materials (resulting damage) Full policy limit
Terrorism Full policy limit
Flood Limits to be agreed upon
Earth movement Limits to be agreed upon
Equipment breakdown Limits to be agreed upon
Hot testing Limits to be agreed upon
Debris removal Limits to be agreed upon
Pollution, mold, fungus Limits to be agreed upon
Additional costs due to building laws Limits to be agreed upon
Extra expense (contractors) Limits to be agreed upon
Waivers of subrogation In compliance with contracts

Source: www.irmi.com


1 For a detailed analysis of builders risk insurance requirements in different standardized contract forms, refer to The Builders Risk Book, by Steven A. Coombs and Donald S. Malecki, published by International Risk Management Institute, Inc., in 2010.


What the Accomod8u Data Leak Shows About Student Housing

Here’s the background you need in order to understand the data hack, what it says about student housing, and what’s being done about it, as published by CBC News.

Earlier this month, an anonymous Reddit user wrote a post titled: “Massive Data Leak of Accommod8u Maintenance Requests Over the Last Two Years.” In a public Google document, the author said they managed to log into Accommod8u’s online tenant portal and access two years worth of maintenance requests. (Reddit)

Leaked information from the popular student rental company Accommod8u appears to paint a picture of apartments plagued with vermin, mould and broken heating systems.

But some say the problem with student housing in Waterloo goes beyond just one company.

Here’s the background you need to understand the data hack, what it says about student housing, and what’s being done about it.

What was the leak?

Earlier this month, an anonymous Reddit user wrote a post titled: “Massive Data Leak of Accommod8u Maintenance Requests Over the Last Two Years.”

In a public Google document, the author said they managed to log into Accommod8u’s online tenant portal and access two years worth of maintenance requests.

“A close look at the 6000+ entries reveals an egregious disregard for the rights and wellbeing of the residents,” the user wrote in the post.

The report describes requests from tenants for help dealing with mold, vermin, carbon monoxide and fire alarm issues and faulty heating systems. It also criticizes Accommod8u’s response time, alleging that users often put in multiple requests for help that were ignored.

Who is involved?

The company

On its website, Accommod8u describes itself as a high-end apartment brand with eight high-rise buildings under its ownership. The web copy says each rental suite is clean, secure and “maintained to the highest standard.”

The company has been criticized before, after tenants had their move-in dates at an Accommod8u property delayed for weeks because construction wasn’t finished. Once the building was occupied, tenants said they still encountered problems with air conditioning, garbage chutes and laundry machines.

Student move-ins delayed again, this time for TheHub in Waterloo
CBC has reached out to Accommod8u for comment and has not yet heard back.

The company has been criticized before, after tenants had their move-in dates at an Accommod8u property delayed for weeks because construction wasn’t finished. (Submitted by Brooke Willis)

The hacker

In a Google document titled “Contact Information,” the person or people behind the hack said they will not reveal their identity, or whether one or multiple people were involved. CBC has not spoken to those responsible for the data breach.

The police

The Waterloo Regional Police Service has confirmed that they are investigating the hack, but have not said whether any charges are pending.

What the leak shows

Students at the University of Waterloo say the hack shows what many of them knew already: that students are easily taken advantage of, and often don’t know what recourse they have when that happens.

Colin Chu was one of about 20 students who joined a meeting of the Waterloo Undergraduate Students’ Association Sunday, where the Accommod8U hack was on the agenda.

He said poor maintenance — along with disputed leases and other problems — is an ongoing problem at many of the rental companies that target students in Waterloo.

“Especially a lot of international students that are coming into the region for the first time and don’t have a really good handle on renting procedures or ways that they can be scammed or misled,” said Chu.

Chu said many students don’t know what their rights are, or that agencies like the Landlord and Tenant Board exist, and hopes they’ll become more active in learning about possible scams and ways to get help.

What officials are saying

Tenille Bonoguore, who represents much of the university area as a city councillor for uptown Waterloo, called the contents of the Accomod8u report “disturbing.”

“The kinds of issues that were being dealt with and the long time it was taking to deal with these issues give me concerns both for residents’ health and for their mental health,” said Bonoguore.

Bonoguore and her fellow councillors discussed the leak at a committee meeting this week, and questioned city staff about what the municipality’s responsibility is.

Shayne Turner, the city’s director of municipal enforcement services, said the city doesn’t have the power to investigate buildings without first being invited by a tenant.

But if tenants are having problems with their unit and aren’t getting anywhere with their landlord, they can contact the property standards office, which will check to see if there’s really a problem.

An inspector can issue a work order requiring property owners to fix problems, or hire someone to make repairs and add the bill to the property owner’s taxes.

What’s next

The undergraduate students association says it will set up a committee to research student housing in Waterloo, and to look into the possibility of a class-action lawsuit against housing companies on behalf of students.

Turner said his team will be in touch with the universities to ensure students understand how his office works, and what they can offer to tenants.

And Bonoguore said she plans to speak to students about their housing rights during a scheduled day upcoming where she was planning to go door-to-door talking about street parties.

“I’m hopeful that residents and tenants become so aware of their rights and what’s expected and how to get help that they end up being able to very successfully advocate for their own health and safety,” said Bonoguore.

“I think anyone who has lived in rental accommodation knows that your state of living is as good as your landlord is,” said uptown Waterloo councillor Tenille Bonoguore.

Author: Paula Duhatschek · CBC News ·


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