How to Succeed in Your Construction Insurance Claim
1. Don’t let an insurable event leave you out of pocket
I’m sure many of us have a bad story to tell about construction insurance claims that weren’t paid out or were only partly paid. But sometimes we are our own worst enemy because we didn’t read the fine print and failed to act in accordance with the insurance policy. Often we don’t lodge our claim correctly or fail to claim all of our costs.
Sometimes events occur on construction projects which result in a loss, and these costs are claimable under either the contractor’s or the employer’s insurance policies. These include losses due to accidents, theft or weather damage.
Most policies only pay for the cost of removing debris and replacing the damaged items or sections of work. They don’t recompense the construction contractor for any lost time, or any penalties or damages that the employer may impose against the contractor for late completion caused by these events. They also won’t pay any consequential damages. Often the construction contractor has to claim against the insurer for the cost of repairing the damage as well as submitting a variation claim to the client for the time lost.
2. Notifying the insurance company
When an insurable loss occurs at your construction company, it’s important that the relevant insurance company is notified as soon as possible. The contractor should know if the event is insurable, under what policy it can be claimed, and who the insurer is, and what the excess or deductibles are. Photographs should be taken of the damage, and the area made safe and secure (where possible keep a record of the costs of making the area safe as these costs should be claimable).
A report must be prepared and submitted to the insurer. This report should include:
- The insurance policy number.
- The date and time of the event.
- The location of the construction project.
- What the event was.
- What the damage is
- An estimate of the repair costs.
- Mitigating actions were taken, if applicable.
- Photographs of the event and subsequent damage.
- Any injuries.
- The repairs implemented, or actions taken, to secure the facility and make it safe.
- Names of witnesses if applicable.
- Contact details of the person submitting the report.
- The urgency of the response required from the insurer.
- Police case numbers if relevant.
The employer should be immediately advised if the facility and construction works have been damaged.
The owners of equipment damaged in the event need to be advised right away. The construction contractor should keep a record of who was advised of the damage and the applicable case numbers.
In certain incidents, the police will have to be notified – again the construction contractor must obtain a case number. Certain accidents on the project are notifiable to the authorities – especially if there is a serious injury or death or if a member of the public was involved.
When the insurer is contacted they will normally advise if an assessor will inspect the damage and what the next steps are to repair it. Only once the insurance assessor gives the go-ahead to proceed can the damage be repaired.
Obviously, time is of the essence since the damage may be delaying progress on the project, and normally most insurance policies will not cover the impact of these delays. It’s important the insurer understands how critical it is for work on the project to continue and for repairs to be completed.
3. Costs to be included in the construction of your construction insurance claim
Insurance Claims should include all of the costs associated with carrying out the repairs and making good damage including:
- The cost of the materials together with their transport, insurance, and handling.
- All labor costs.
- The cost of all equipment engaged to reinstate the work.
- Costs of cleaning, removing and disposing of debris, including pumping out storm and floodwater.
- Protection of the undamaged work which is affected by the repair work.
- Demolition of damaged structures.
- Supervision and overhead costs.
- Damage to plant and equipment. It should be noted that in many instances these damages may have to be claimed under the individual policies of the items.
- Temporary support or access structures.
- Subcontractors’ costs associated with the damage.
Unfortunately, most insurance policies don’t cover for consequential damages. Any delays caused by the event, including their resultant costs, won’t be covered.
If your project has a costing system utilizing cost codes then it’s useful to allocate a specific cost code to the insurance claim so that all the costs can easily be found.
4. When the client is responsible
In some cases, the client may have been responsible for the damage caused by the insurable event. For instance, if the client’s actions resulted in the flood (maybe they discharged water from their operations flooding the construction work), their vehicles or operations damaged the construction work or the contractor’s equipment then the contractor should first notify the client’s insurers and lodge their claim with them.
However, it’s important to also keep their own insurers informed of the event and costs. If the client’s actions led to the losses the contractor will be able to claim against the client for all delays and costs resulting from the client’s actions which aren’t recovered from the insurers.
Contractors frequently forget to claim all the costs they are entitled to in a construction insurance claim. Sometimes they have their insurance claims rejected because they haven’t notified the insurer or they carried out repairs before the insurer was notified. Following these procedures may ensure you are paid for losses caused by an insurable event.