“Flood” is a primary exclusion in practically all builders risk policies. Understandably, many contractors and owners considering this coverage assume their project will be in a flood plain and will be subject to flooding. While this is a compelling argument to get flood insurance, there are others equally important. A common flood exclusion is defined as a general and temporary condition of a partial or complete inundation of normally dry land areas due to:
- The overflow of inland or tidal waters
- The unusual or rapid accumulation or runoff of surface water from any source
- Mudslides or mudflows which are caused by flooding
While this language may not surprise you and may even be expected, consider #2: The unusual or rapid accumulation or runoff of surface water from any source. Consider our monsoon season when heavy rains occur frequently in a short period of time. A claims adjuster told me a few years ago that flood is the most common uncovered builder’s risk claim, but not in the traditional sense. He was referring to the rain that collects on a construction site and seeps into a structure under construction, causing damage to carpet, drywall, and molding. That is a flood claim, and unless flood insurance is added to the policy, there is no coverage.
Here are two additional situations where we have seen “surface water” create a flood claim:
- Construction of a large park: The site gets planted with grass seed and then a water line breaks away from the site, dumping thousands of gallons of water on it, washing away all the seed and destroying the site. This was a flood claim.
- Construction of a gas station: The excavations are dug for the gas tanks, the vaults are lowered into them with a crane, and the piping hooked up. On the same day, a microburst hits the area with significant rainfall. The street floods, and rainwater seeps onto the site and into the excavations. As a result, the vaults float, causing damage to the piping. The crane had to be brought back out to lift the vaults and re-excavate. This was also a flood claim.
Even though neither of the examples above had a body of water nearby, both were flooded. Acquiring flood insurance is relatively affordable if a project is not in a designated flood zone. It’s vital to remember that adding flood coverage to a builders risk insurance will result in a higher deductible. The minimum deductible will be $25,000, with the amount increasing depending on the insurance carrier.
I hope that as you plan your next project, you will think about including this important coverage. We will gladly answer any questions you may have.