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Who needs a COC or CGL?
Construction Questions
By Menno Dueck
You’ve protected your investment by insuring your home and commercial buildings. Now you want to increase the square footage with an addition, which naturally increases your property value, which in turn affects your insurance coverage. Do you wait until the addition is done and then visit your insurance agent/broker to review and adjust your coverage? Is your addition and building covered while under construction?
COC (Course of Construction insurance) is coverage put in place to increase insurance coverage to the value of the completed project. Before you begin your renovation, contact your insurance broker to find out what coverage is required, the cost and the time frame allowed. Some companies will give permission for renovations, some want to place a COC on the entire structure. So what can happen if you decide to ‘roll the dice’ and not have your insurance coverage reviewed and revised if necessary?
In this hypothetical situation, Tony and Eva Franks own a house (which is adequately insured) and decide to put on an addition for their personal yoga studio and don’t consider that this change to their home may affect their coverage. They hire Randy, a fellow that has done some home renovation projects for people they know; they don’t ask if he has a CGL (commercial general liability insurance) in place, nor does Randy ask the Franks about their coverage.
The project progresses and is now to lock up (framed, roof on, windows and doors in, electrical and plumbing roughed in), insulation and drywall has been delivered and is waiting to be installed.
But fire breaks out one night, completely destroying the addition. If the owners’ insurance company rules their home insurance is not adequate coverage with the new addition, or a COC should have been in place, there may not be any payout on the loss for the Franks. While Randy was not at fault for the fire, if he had been, there would be no insurance payout (not covered by a CGL) and Tony and Eva could possibly hold him personally liable and sue.
At the end of the day, assuming no insurance coverage, here’s what is left: Tony and Eva have paid Randy $40,000 and have an outstanding invoice for $18,000; all for a yoga studio that doesn’t exist. Randy has not received any further payment from the Franks and hasn’t been able to pay his trades or suppliers.
So, put your insurance in place before you start your project or roll the dice and hope you don’t get burnt…the choice is yours. And if the person or company working on your project can’t provide proof of CGL coverage, you can always choose to fire them.
Submitted by: Menno Dueck, Ask Menno Construction Consulting, Dueck Enterprises Inc.
250-426-5460 www.dueckenteprises.com
