Coverage Challenges Regarding Contractors and Subcontractors in Real Estate Development

Real estate developers hire a multitude of contractors to carry out their projects, including architects, engineers, property managers, and more. These professionals have unique liability risks and often carry specific insurance policies to safeguard against them. However, litigation targeting one of the contractors often names the developer, too. Commercial general liability insurance may not offer sufficient coverage. Real estate developers should consider the following policies to avoid any coverage gaps:

  1. Real estate development professional liability insurance policy. Development projects can take months, sometimes extending into years, to complete. These policies provide coverage for claims alleging the developer committed a wrongful act while conducting their professional services, including errors or omissions, neglect, or breaches of duty. These policies are essential, as they span every stage of the project.
  2. Course of construction insurance policy. These policies protect against unforeseeable accidents that cause losses or damage to the project, property, equipment, and more. They typically offer broad coverage for the general contractor, subcontractors, and owner. The policies also provide rapid claim resolution to keep construction projects on schedule.
  3. Owner controlled insurance policy (OCIP). Real estate developers often require their contractors and subcontractors to carry insurance policies, but relying on those puts the developer at significant risk. OCIPs, also known as wrap-up insurance, provide coverage for all the construction and contractors working on the project. Real estate developers that opt for OCIPs instead of requiring service providers to secure their own insurance typically include that cost in any bids contractors submit.

Real estate developers can’t afford to underinsure their projects. However, real estate risks are as numerous as they are nebulous. Working with an experienced insurance provider can help identify project-specific risks and avoid coverage gaps. Contact Windermere Insurance Group to discuss your next real estate development.