Insurance for Design-Build Projects - Design-Build for Water and Wastewater Projects - page 156

excluded altogether are the DB firm's own tools and equipment, as they are more appro-
priately covered by the DB firm under its property/inland marine policy.
Finally, testing (both hot and cold) should be covered by the BR policy, although it
is not common in the water/wastewater industry. Most policies will provide for cold test-
ing within the standard policy terms and conditions. Hot testing is the introduction of a
catalyst into a system for the first time: additional underwriting and premium is required
to obtain this coverage.
There is no standard builder's risk policy, so the coverage should be carefully reviewed
before purchase. This should be done in conjunction with a review of the insurance and
indemnity sections of the contract with the project owner, as well as contracts with ven-
dors and suppliers.
Transit/cargo. A builder's risk policy should provide transit coverage for all property
arriving at the project site to be installed in the project, with the coverage limit based on
shipment values. The DB firm should be aware of pieces of equipment that are particularly
expensive, require extensive lead time for replacement in the event of damage, or
necessitate special storage arrangements once at the project site. In these instances, the DB
firm may handle the extra risk by contractually requiring that the manufacturer maintain
responsibility for the product until it has arrived safely at the project site or purchasing a
more specific coverage or limit.
Delay coverage. In addition to physical damage to the project itself, projects under
construction are also susceptible to loss due to construction delays resulting from such
damage. Often referred to as builders' risk time element coverage, delay coverage
reimburses the insured for this loss, when the delay is a direct consequence of damage to
the project by an insured peril.
The rise of “project financing” is increasing the prevalence of these policies. Under
this arrangement, lenders advance not only the labor and material costs associated with a
given construction project but also the project development costs, under the assumption
that the revenue generated by the completed project will cover the loan payments. Lend-
ers in these scenarios are often interested in insurance that enables the project owner to
make the loan payments as scheduled even if revenues from the completed facility are
delayed by damage to the project during construction.
Joint Venture Liability
Joint ventures (JV) can be structured in a multitude of ways, so the specifics of the JV
agreement and the JV's contract with the owner must be carefully considered when deter-
mining the best means for insuring it. The firms of the JV will need to decide if separate
policies will be purchased for the JV or if each member will use its own practice program
to insure its interest.
Policies in the name of the JV should be obtained when one or more of the following
situations apply:
• The JV will have employees.
• The owner requires policies or certificates in the name of the JV.
• The JV contracts with parties other than the JV members.
• Multiple JV members will have design responsibilities.