CP 11 21–BUILDERS RISK–THEFT OF BUILDING MATERIALS, FIXTURES, MACHINERY, EQUIPMENT

(June 2019)

builder risk

INTRODUCTION

The Insurance Services Office (ISO) CP 00 20–Builders Risk Coverage Form insures buildings or structures under construction subject to the causes of loss, exclusions, and limitations in the causes of loss form attached to the policy. None of the causes of loss forms cover theft of building materials. The basic and broad forms do not provide any theft coverage and the special form, which does provide theft, specifically excludes theft of most building materials. The Limitations section in CP 10 30–Causes of Loss – Item d. eliminates coverage for the theft of building supplies and materials that are not yet attached to the building/structure.

CP 11 21–Builders Risk–Theft of Building Materials, Fixtures, Machinery, Equipment is unusual because, while it is actually modifying a cause of loss, the modification is made only within CP 00 20 so no reference is made to a causes of loss form.

This endorsement is updated with the 10 12 edition. The major change is that the term employee is expanded to specifically include both leased and temporary workers. This could be viewed as a reduction of coverage because the term “employees” used in the previous editions did not specifically include or exclude temporary workers or leased employees.

SCHEDULE

Each covered building or structure must be listed and described on the endorsement schedule. A limit of insurance and a deductible for theft must also be entered on the endorsement schedule. Coverage applies only for a listed building and location.

A. COVERAGE

The insurance company pays for loss or damage as a result of theft or attempted theft of the following property:

Machinery and fixtures
Building service equipment
The named insured’s building materials and supplies used in construction

Coverage applies only if the property is intended to be located permanently in or on a building or structure that is within 100 feet of the premises.

B. LIMITATION

Coverage is conditional and applies only during working hours. There is no coverage if the theft or attempted theft happens after working hours. If coverage is needed after hours, a watchman must be on duty. A watchman is NOT required during working hours.

C. LIMIT

The most the insurance company pays in any one occurrence is the theft limit on the endorsement schedule.

Note: This endorsement is subject to all of CP 00 20’s terms and conditions. F. Additional Conditions 2. Need for Adequate Insurance in CP 00 20 also applies. The limit of insurance should be the building or structure’s completed value because of that additional condition. Otherwise, the named insured could be penalized for not carrying adequate insurance.

D. DEDUCTIBLE

ISO Rules state that $1,000 is the minimum deductible for this coverage but this endorsement does not have a default deductible. Higher deductibles are available and can be used. This deductible amount is separate and apart from any other deductibles and must be entered in the space provided on the endorsement schedule. This deductible is the only per occurrence deductible that applies to this endorsement’s coverage. This deductible provision should be reviewed along with D. Deductible in CP 00 20–Builders Risk Coverage Form.

Example: The Pringle family purchases CP 00 20–Builders Risk Coverage Form on a building under construction that has a completed value of $500,000. CP 10 30–Causes of Loss–Special Form applies, and the deductible is $5,000. They also include CP 11 21–Builders Risk–Theft of Building Materials, Fixtures, Machinery, Equipment with a $5,000 deductible. A well-organized gang of thieves overpowers the night watchman and steals every bit of copper on the jobsite, both copper already installed and copper still to be installed. The value of the copper already installed is $25,000 and the value of the copper to be installed is $50,000. The Pringles make the claim for the copper already installed against CP 00 20 and the claim for the copper still to be installed against CP 11 21. However, the $5,000 deductible is applied only once because the total loss is due to one occurrence.

E. EXCLUSIONS

This coverage is subject to three important exclusions.

1. Dishonest or criminal acts

These are dishonest or criminal acts committed by the named insured, its partners, managers and members of LLCs, employees, directors, trustees, or authorized representatives. Such actions that contractors, subcontractors, or their employees, or any party entrusted with covered property commit are also excluded. This exclusion applies whether the persons act alone or collude with others. It also applies whether or not the acts take place during regular working hours.

The term “employee” used above includes leased and temporary workers.

Example: There is a break-in during construction of the Kellogg building and thieves steal over $50,000 of building material on the construction site. Kellogg’s owners file a claim for the loss. A short time later, the police arrest a carpentry sub-contractor’s employee along with his friends who confess to the crime. This loss is not covered because of this exclusion.

2. Voluntary parting

This is the named insured or anyone else entrusted with the property being tricked or deceived into giving it away.

Example: Greg is the building owner. He receives a load of decorative brick from a building materials dealer. A few hours later, a man in a truck who claims to be the dealer’s employee arrives and tells Greg that the brick delivered is the wrong color and grade. He says his instructions are to pick up that material and return with the correct brick later in the day. Greg agrees and calls the dealer later in the day to follow-up on the delivery. The dealer denies knowing anything about this "misdelivery" and Greg suddenly realizes he has been tricked. The building materials dealer does not have any obligation in this situation because Greg signed the invoice that acknowledged that he received the original delivery. Coverage does not apply to this incident because Greg voluntarily parted with the bricks.

Note: This exclusion is designed to encourage insureds to act prudently. In the example above, Greg should have asked the “employee” for identification and discussed the situation with the building materials dealer. He should have also demanded to see the signed receipt, because he had signed the invoice when the brick was first delivered. This coverage gap can be filled by attaching CR 04 17–Fraudulent Impersonation to a crime coverage form.

Related Article: CR 04 17–Fraudulent Impersonation

3. Missing property

When the only evidence that property is missing is a shortage in inventory or similar unexplained disappearance, there is no coverage. This is sometimes referred to as "inventory shrinkage."

RATING AND PREMIUM CALCULATIONS

The rate for this coverage begins with the builders risk Group I rate for each covered premises multiplied by a .25 factor. The limit of insurance is then multiplied by this rate. The premium determined contemplates the $1,000 minimum deductible. Higher deductibles are available. The insurance company determines any additional credits to apply if there is a higher deductible.