An insured is installing a new HVAC unit on the roof of a tall building. The insured plans to hire a helicopter service because a crane will not suffice. The significant costs associated with hiring a helicopter mean that any delay in the installation—due to, for example, the HVAC delivery truck breaking down on the way to the job site or poor weather conditions preventing the helicopter from flying—could present serious problems for the insured.  

Q: How do we protect the insured against the extra expense associated with a potential delay? My thought is to write a builders risk policy and include soft costs, but I've read a few forms from several carriers and I cannot seem to find coverage, even under the business income section.  

Response 1: Use an installation floater and clearly describe the perils and risks.

Response 2: It's a very real exposure, but I suspect you won't find a standard form that covers it. This is a job for the surplus lines market, partly because it's unusual, and partly because you're looking for coverage for an extra expense that does not necessarily involve physical injury to the subject property, which isn't commonly found in the standard market. You need to find a form that covers both physical injury to the HVAC unit and a delay in delivering it to the job site.

Response 3: Soft costs are normally covered with an endorsement, but not all carriers will offer it. Bear in mind that any loss under that endorsement would still have to be a covered loss under terms of the policy. If you obtain an endorsement, whose terms will vary between carriers, read it carefully to ensure it covers what you and the insured consider "soft costs."

Response 4: You definitely want to include soft cost coverage on whatever builders risk policy you use. Force majeure coverage is not common, but you might want to investigate it.

Response 5: An installation floater would be more appropriate than a builders risk policy. However, the next question is, what are the client’s exposures under the various contracts in place for this job? I would want to see the contracts with the company delivering the HVAC unit, the helicopter service and the building owner—the insured could have the opportunity to pass off certain liabilities.

You should probably contact a specialty market and get project delay coverage, starting with the carrier that writes the installation floater. These forms are all proprietary so you will need to review each one carefully.

Response 6: These issues belong with a construction attorney who understands your dilemma about inclusion or exclusion of the master contract.

Response 7: Practice risk management and deliver the parts well in advance of the helicopter date. That way, if something happens to the delivery truck, you will have enough time to postpone the helicopter service. An inland marine floater or builders risk policy could be designed to include the transit exposures. Any helicopter cancellation fees might be covered as a continuing expense in the business interruption form.

As to weather-related delays, that can be covered by weather insurance. Find out what your markets offer, or ask the builders risk carrier to see if they could add coverage.

This question was originally submitted by an agent through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.