A three-storey home under construction in Toronto nearly toppled over last week after strong winter winds hit the first storey of an adjacent house, causing neighbours to evacuate.
The incident raises an important insurance question: aside from Mother Nature, who’s responsible?
Learn more about builder's risk insurance here.
An incident like the one in the city’s Leslieville neighbourhood is covered by a builder’s risk policy and one insurer is advising brokers to become engaged with their clients on the issue.
“For a broker, it’s in their best interest to be very proactive with the insured and make sure the insured is upfront about the state of construction and if there’s going to be a delay, be proactive about communicating that to the insurer,” Jason Zalm, vice president of IT at Square One Insurance said, adding that builder’s risk is a unique offering.
“Where we’ve gotten burned in the past, though it typically works out well for us, is where the home doesn’t get completed in the original timeframe. Worst case scenario, the insured isn’t contacting us, we’re having to contact them and they’re letting us know.”
Zalm said water related damages like sewer backup with the site left unattended, or rain coming through an open window, were the most common claims but arson also ranks highly when loss severity is taken into consideration.
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As for that ill-fated home-to-be in Toronto’s east end, Zalm said Builder’s Risk would respond by paying for the structure’s return to precollapse state, but not to completion.
“It would be your building limit that would cover that, we do offer guaranteed replacement cost, the way we calculate replacement costs on a builder’s risk policy is based on the attributes of the house as if it were finished,” Zalm said.
“We would restore it to the state it was at just prior to damage, we’re not going to finish it.”
The insurer might also look for subrogation options.
“If it was just in the framing stage and the framing wasn’t properly braced, we might look to the framer to see if we could recover from that,” Zalm said.
“Presumably that framing crew would have their own insurance policy and we’d end up dealing with their insurer.”
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