Residential Construction
Residential
development &
construction.
Residential construction is one of the riskiest business activities. For this reason, we created IMA Residential, a dedicated practice group, to meet the unique needs of the development community.
We provide a systematic and comprehensive approach to meet the needs of this community by combining proactive risk management expertise with insurance products.
An Understanding of the Entire Playing Field
The following risk categories must all be considered when evaluating any construction project.
Business Risk
- Entitlement Risk
- Cost Escalation Risk
- Rental / Sale Market Volatility
- Interest Rate Volatility
- Capital Appetite
- Lender Constraints
- Material Constraints
- Labor Shortages
- Delay Costs
- Faulty Workmanship
Legal Risk
- Premises/Operations Exposures
- Post-Construction (Construction Defect)
- State Law Interpretation
- Regulatory Action
- Pollution
- Executive Risk
- Professional Liability
Critical Questions
Are you aware of potential coverage gaps in your existing policy?
Considerations
- Damage to “the work itself” vs. “resulting damage”
- Anti-concurrent causation
- Continuous and progressive property damage
Does your policy have exclusion language that would result in a disputed claim?
Considerations
- Manuscripted endorsements often result in disputed claims
- Poorly drafted EIFS exclusions may unintentionally deny coverage for stucco cladding
How confident are you that state law is not robbing you of coverage?
Considerations
- Insurance coverage is subject to individual state law interpretation – don’t be blind-sided
- State law treatment of “rip and tear” damage can drastically affect the claim experience
- State law treatment of an “occurrence” can entirely gut your coverage – be careful at policy inception
Residential Practice Overview
IMA Residential is a dedicated practice group within the IMA Construction Practice at IMA Financial Group that specializes in the needs of residential and developers and contractors. The practice group is led by two former attorneys, one from insurance coverage practice and one from real estate development practice. The balance of the team is a collection of professionals from diverse backgrounds in the insurance and construction industries that are dedicated to the unique challenges faced by residential developers and contractors.
IMA Residential has risk-managed over 400 projects for our clients throughout the country. Our long-term relationships with residential underwriters, combined with our broad industry experience, allow us to explore creative risk management solutions to meet the needs of our clients since each project presents new challenges.
Our team members have been thought leaders in residential development for several decades. Since 2001, IMA Residential has been the only broker actively involved with the Colorado Legislature in passing legislation to improve the legal environment for residential developers and contractors.These efforts include active support of the 2003 tort reform statute and the 2010 bill to address liability coverage for construction defect claims. Our deep, long-term relationships with many law firms helps us to stay ahead of legal trends and industry changes.
IMA Residential takes a comprehensive approach to our clients’ risk, adapting to developers’ unique risks under state law. By working proactively with legal counsel for our clients, we can anticipate issues and address the hidden costs of development projects and help clients achieve their financial goals. Our dual approach – from both a “Transactional” and “Risk Management” perspective sets the tone for a powerful collaboration between the insurance, legal and development teams.
Key Risk Considerations
From “cost, cost, cost” to Addressing the Hidden Costs of Construction Risk
Considerations
- Premium cost discussion giving way to hidden cost discussion
- Benchmarked premium data to support decision-making
- Direct & indirect costs impacting the financial results of the project
- Major Policy Exclusions
- Disputed Claims
- Hidden Exclusions
Multiple Ways to Insure Apartment Projects
Considerations
- Short-term vs long-term plans for the project affect decisions up-front
- Lender/Capital Partner Insurance Requirements?
- How important is control of the claims process?
Prime Contract Drafting Issues
Considerations
- Substantial completion coordination
- Deductible Allocation
- Bid deductions for GC and Subs
The Impact of State Law on Insurance Policies
Considerations
- Construction Defect as an “occurrence”
- “Rip & Tear” coverage
- Coordination between general liability and builders’ risk policies
Managing the Transition from Construction to Permanent Insurance
Considerations
- Plan Ahead: How will your policy trigger the completed operations coverage period?
- “When coverage automatically ceases” under a builders’ risk policy – traps for the unwary
- How are you covering unsold condo units or third-party TI projects in your mixed-use building?
Residential Risk Traps
Considerations
- “Hidden” Exclusions
- Exterior Cladding
- EIFS/DEFS
- Pre-Manufactured Components
Professional Risk Issues
Considerations
- Design professional exposures
- Limitations of architect liability programs
- Developer professional liability exposures
Environmental Risk
Considerations
- OCIP pollution exclusion?
- Site pollution
- Construction pollution
- Potential delay claims?
The IMA Difference
In addition to the construction risk services, we work alongside the other adjacent verticals at IMA Financial Group,
such as:
- Surety Practice: How well do you understand the difference between Subcontractor Default Insurance (SDI) and traditional surety bonds?
- Cyber Risk: Is your SPE properly covered in the event of a social engineering event?
- Professional Risk: How prepared are you in the event of a design-related claim?
- Environmental Risk: Highly specialized coverage requires specialized professionals.
- Executive Risk: Investment disclosure issues are a minefield – Are you protected?
While the background of the team members informs how we look at complex problems, we have developed a rigorous process designed to capture each decision-point in a timely manner.
A customized service plan is developed for each project based on the requirements of the development team, the legal team and the project subjectivities.
The IMA Residential team integrates early with the client’s legal team to proactively address risk issues comprehensively.
IMA Residential Construction Practice Group
Pomerantz Executive Advisor, Complex Risk, Commercial Lines
Sharkey SVP Director, Construction Practice, Commercial Lines
Sampson Business Development Executive, Commercial Lines
Hyer SVP, Commercial Lines
Murphy Risk Advisor, Commercial Lines