Project – 60MWdc Utility Scale Ground Mount Solar Project in the United States
INSURANCE CONSIDERATIONS –
Builders Risk/Property Policy approximately $60M
Business Income/Revenue Coverage of $4M
Delay in Start-Up
General Liability of $1M per occurrence
Umbrella Liability of $5M per occurrence
List of Issues – If the EPC contractor procures the insurance during the construction phase, listing the EPC as the primary named insured and their developer/project owner as the additional insured on their policy:
I. LOST DELAY IN STARTUP PROJECT REVENUES –
Contractors and subcontractors have no insurable interest in the Project revenue, which lenders will require the insured to buy through Delay in Start Insurance. Annual revenues on a project of this size might range between $3.5M – $4M. A delay of 3 months could equate to a loss of $900K that would most often not be insured under the EPC’s policy.
II. LACK OF PROJECT SPECIFIC LIMITS –
How broad is the policy language from your EPC’s carrier? By controlling their own insurance, the Developer removes this question all together. They can obtain broadened coverage with sub limits for items like earthquake and flood tailored to a specific project and the risk concerns of the Developer.
III. CLAIMS FROM OTHER PROJECT –
More often than not, coverage limits earmarked for your project are shared with ALL the other projects the contractor is completing construction on. Contractors may have policy aggregates which could be eroded by losses on other projects and ultimately limit their insurer from making claims payments on a specific project.
IV. ADDED EPC MARK UPS –
Going direct to purchase your own insurance reduces the likelihood of insurance costs mark ups by the contractor.
V. POLICY TRANSITION FOR CONSTRUCTION TO OPERATIONAL –
Avoid grey areas from a claims perspective that could arise when transferring to an Operational All Risks policy for losses that are related to issues arising from the course of construction and/or maintenance period.
VI. BUILD YOUR CARRIER RELATIONSHIP:
Going direct builds an early relationship for the Owner with their preferred carrier, which can be leveraged on long term operational costs as well as other projects. We have seen carriers make pricing concession of 20% or more for their preferred insureds.
VII. CLAIM PAY-OUTS –
Greater control by the owner in receiving money from insurers following a claim.
VII. COVERAGE FOR YOUR EPC –
Contractors/ subcontractors are still named in the policy as additional insureds so they are not put in a disadvantaged position.
