Policyholders do not study all available forms of coverage, nor do they usually understand how policies can be tailored to provide better coverage through recommendations. In a recently published blog on soft costs according to a risk policy for builders, Builders Risk Insurance and Soft Costs Claims I noted the importance of choosing an experienced insurance agent who knows the client's risk area with great expertise:
[T] the agent must get access to each type of project to tailor a product with the specific risks of that project:
Keep in mind that a major disaster can have a detrimental effect on the construction project, in addition to the delay in construction. For example, a construction project that is expected to be completed during a robust economy may suffer further losses if the delay leads to opening up after the economy has fallen into a recession. Stigmat associated with occupying a property where a catastrophic loss occurred can also make it difficult to find tenants. Your broker can help you design a policy that meets your specific needs and risk exposures.
The choice of the agent that compiles the builder's risk coverage is important.
This was highlighted in a case of error and omissions against an insurance agent. who informed a policyholder about available insurance under a construction risk policy where soft costs were not insured. 1 The court noted relevant facts:
APM, a property management company, applied for a construction risk insurance from TCI to cover an apartment building. ..Jay Alsop, APM's president, discussed insurance with TCI's agent Devin Gaard. One insurance in particular, from the Philadelphia Insurance Company (& # 39; Philadelphia & # 39;), covered lost rent and other "soft costs", such as interest.
Alsop also received a quote from another insurance agency for another insurance from Travelers Insurance Company ("Travelers"), which was cheaper than the Philadelphia policy. The travel policy did not have coverage for lost rent and soft costs. Alsop informed Gaard of the travel policy and asked Gaard to obtain the policy as quoted by the other agency, without amendment.
[A] fire at the construction site delayed the opening of the apartment building for five months. APM filed a claim under the insurance for damages caused by the fire, including lost rent and interest costs. Travelers paid part of the claim, but denied the claim for lost rent and interest because the policy did not cover these costs.
APM sued TCI, claiming that TCI and Gaard were negligent in not offering APM a policy approval that provided additional coverage for lost rent and soft costs. TCI denied liability and requested a summary judgment, claiming that APM did not request additional coverage for lost rent and soft costs and that TCI and Gaard were not obliged to offer the additional coverage to APM. The district court upheld TCI's claim and ruled that only one conclusion could be drawn from the facts. The court concluded that APM did not raise a real issue of material facts as to whether Gaard had breached its obligation to APM.
The cases of insurance negligence against agents are complex. In this case, as the court found that there was no "special relationship" between the agent and the policyholder, the court considered that the failure to explain that the travel policy could have been approved to include low costs and lost rents was fatal to the case against the insurance agent.  The case is also a lesson about buying "cheap" insurance based on price. Soft costs and lost rents are just as important as the direct costs of rebuilding. Do not buy a cheap insurance. Instead, look for good insurance professionals to provide better insurance at a reasonable price.
Thought for the day
Talent is cheaper than table salt. What distinguishes the gifted individual from the successful one is very hard work.
1 APM v. TCI Ins. Agency 877 N.W.2d 34 (N.D. 2016).