Builders' Risk Insurance Claims And COVID-19

• Published date: 06 June 2020
• Author: Mr Satinder Sidhu, Samantha Ip and Rosalie Clark
• Subject Matter: Employment and HR, Real Estate and Construction, Coronavirus (COVID-19), Health & Safety, Employee Benefits & Compensation, Construction & Planning, Employment and Workforce Wellbeing, Insurance Claims, Operational Impacts and Strategy
• Law Firm: Clark Wilson LLP

Will a builders' risk policy respond to cover losses for site shutdown and delay as a result of COVID-19? The parties involved in construction projects may be asking themselves this very question. Insurance coverage could be triggered for losses incurred as a result of an outbreak of COVID-19 on site. Coverage will of course depend on the specific wording of the policy and any exclusions. Losses incurred because of a suspected case or expenses incurred to implement prophylactic measures intended to prevent the spread of COVID-19 are likely not covered. We consider the following issues in this article:

1. What is covered by a builders' risk policy?
   
2. Are there exclusions that may remove coverage?
3. What losses related to COVID-19 could be covered?

Certain construction sites in B.C. may have been temporarily shut down due to a confirmed case of COVID-19. Construction sites may also have been shut down at the direction of a governing authority because certain health and safety guidelines were not met. Further, construction projects may have suffered labour shortages as certain crews self-isolated due to symptoms or having come in contact with a COVID-19 positive case. In other jurisdictions, construction projects were halted all together during the initial phase of the COVID-19 pandemic pursuant to government orders in an effort to control transmission. No doubt, construction projects have experienced losses including extra expenses and delay in relation to COVID-19.

1. What is covered by a builders' risk policy?

Builders' risk policies cover damage or loss to property during the course of construction. Builders risk policies require that there be physical damage or loss to property before coverage under the policy is triggered. Physical damage is tangible damage to any property, such as a bent beam, or cracked concrete. Physical loss of property has been interpreted as including loss of use of property. In the context of the COVID-19, a key question for construction firms and insurance professionals is whether the loss of use of the construction site arising from COVID-19 constitutes physical damage or loss such that the insured parties can gain access to coverage. Each of the scenarios described above could arguably result in some form of loss of use of the construction site due to COVID-19.

There is no case law in Canada dealing with whether the infiltration of a virus causing delay or cessation of work or otherwise restricting or preventing access to a...