Illustration by Wildpixel/Photos.comA financial safeguard for builders

By Dean G. Giles, Fillmore Riley LLP

Many construction projects proceed without incident. Unfortunately, experience shows that damage can occur during construction, leading to significant repair or replacement costs. Builder’s risk insurance is specifically designed to indemnify against property loss to buildings and structures while they are under construction. 

In the leading case of Commonwealth Construction Company v. Imperial Oil Limited, the Supreme Court of Canada described the function of builder’s risk insurance (also known as course of construction insurance) as follows:

Whatever its label, its function is to provide to the owner the promise that the contractors will have the funds to rebuild in case of loss and to the contractors the protection against the crippling cost of starting afresh in such an event, the whole without resort to litigation in case of negligence by anyone connected with the construction, a risk accepted by the insurers at the outset.

The parties generally insured under a builder’s risk policy are the owner, the general contractor and all sub-contractors. The policy term runs from the beginning of construction through to completion of the project, which often is tied to occupancy of the building or structure in question.

When a loss does occur, the first question to be addressed is whether the damage falls within the scope of coverage afforded by the insuring agreement in the policy. In this regard, it is important to note that the risk typically insured under a builder’s risk policy is direct physical loss or damage to property in the course of construction. This means that existing buildings and structures, property not located on site and the contractor’s tools and equipment normally are not included within coverage.

While policy wordings will often vary, most builder’s risk policies are written on an “all risks” basis, the result of which is to provide very broad coverage narrowed only by the exclusions in the policy. In the case of an all-risks policy, the party looking for coverage need only show that the loss in question was fortuitous, meaning accidental, unintentional or unexpected. It is not necessary to prove the exact nature or cause of the loss. Less frequently, coverage will be provided on a “named perils” basis, meaning that the damage must be caused by one of the specific perils set out in the policy. Named perils coverage obviously is much less expansive than that afforded in an all-risks policy.


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Piling Canada is the premier national voice for the Canadian deep foundation construction industry. Each issue is dedicated to providing readers with current and informative editorial, including project updates, company profiles, technological advancements, safety news, environmental information, HR advice, pertinent legal issues and more.