PAGE 4 Construction After COVID-19 Continued “With experts predicting an above average 2021 Atlantic hurricane season, as well as increased potential for an intense wildfire season, these factors create a recipe for disaster,” Gross writes. Fortunately, he adds, there are several steps property owners and their insurance agents and brokers can take to prepare.7 In July 2021, the American Property Casualty Insurance Association (APCIA), a trade association for insurance companies, released a white paper citing policy conditions property owners should be aware of. These include: • Replacement cost coverage, which pays an amount necessary to replace a structure with materials of like kind and quality. This contrasts with actual cash value coverage, which pays only up to the depreciated value of the damaged structure or components. • A factor to reflect the effect of inflation on repair and replacement costs. • Coverage for the additional costs of bringing undamaged parts of a damaged structure into compliance with building codes and ordinances. • “Extended” replacement cost coverage, which increases the amount of coverage available to rebuild during periods of “demand surge,” when the costs of labor and materials rise in the wake of widespread damage.8 Also, Gross encourages commercial property owners to ask about being insured on an agreed value basis, which could be more costly but eliminate the possibility of a coinsurance penalty. That may be a good option until the construction market works itself out. ____________________ 1 Gordian, “COVID-19 Construction Costs Roundtable: A Year Later,” accessed at https://www.gordian.com/resources/covid-19-constructioncosts-roundtable-a-year-later/; and “2021 RSMeans data Release Webinar,” accessed at https://www.gordian.com/resources/2021rsmeans-data-release-webinar/ 2 See David Burczyk ,“10 Positive Construction Trends to Come Out of COVID-19,”March 8, 2021, https://constructible.trimble.com/ construction-industry/10-positive-construction-trends-to-come-out-ofcovid-19 3 Rider Levett Bucknall, RLB Construction Cost Report North America Q1 2021, p. 2; accessed at https://www.rlb.com/americas/insight/rlbconstruction-cost-report-north-america-q1-2021/ 4 CBRE, U.S. MarketFlash: Steel & Lumber Prices Raise Costs but Don’t Dent Robust Construction Pipeline, May 2021; accessed at https://www.cbre. us/research-and-reports/US-MarketFlash-Steel-Lumber-Prices-RaiseCosts 5 Gordian, “COVID-19 Construction Costs Roundtable . . .,”op. cit. 6 MarshMcLennan, Five Ways COVID-19 Has Impacted Construction Companies, October 2020, https://www.marsh.com/us/insights/ research/five-ways-covid-19-has-impacted-construction-companies. html 7 Ethan A. Gross, “Surging Construction Costs Create Surging Risk of Being Underinsured,”NU FC&S Expert Coverage Interpretation, Feb. 22, 2021 8 American Property Casualty Insurance Association, U.S. Property Insurance Market Struggles to Balance Supply & Demand, July 2021, p. 8; accessed at https://www.apci.org/attachment/static/4383/ accessed at https://www.globemw-ai.com/assets/EM07-6148_ GlobeAI-FCS_SurgingConstructionCosts.pdf Insights for Your Industry 800.248.2888 | greenspanai.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com Copyright © 2021 Adjusters International, Ltd. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases. E09-1024 About the Author Mr. Harrington is an independent insurance writer and communications specialist. He served for over 20 years as communications director for the American Association of Insurance Services (AAIS). His work has been published in Best’s Review, Rough Notes, publications of The Institutes, and elsewhere. PROTECTING YOUR PROPERTY
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