Inside Storey
ARE YOU SURE YOU’VE GOT THAT COVERED? Identifying insurance risks for home builders BY TED McINTYRE, WITH MAURO DI TULLIO, FEDERATED INSURANCE
I FIRST MET Mauro Di Tullio during a January roundtable at the OHBA/BILD offices. The topic was the underground economy, and Di Tullio, representing Federated Insurance, was keen to raise awareness of what the absence of adequate fire insurance among spurious contractors could mean to consumers and surrounding property. Federated, a 100% Canadian-owned commercial insurance specialist, has been providing customized insurance solutions to CHBA members for more than 20 years, and Di Tullio was eager to weigh in on more builder-specific concerns, from liability and disability insurance to Builder’s Risk policies (coverage for property in the course of construction that will form part of the completed construction project). Builders’ claims typically arise out of the construction operation, such as ohba.ca
someone tripping over a board or falling into a hole dug as part of the projectI. If the builder somehow causes the house next door to go up in flames, that falls under the builder’s policy. On the other hand, if a homeowner visiting his site tosses a cigarette onto his neighbour’s property and that causes the fire, then that’s the homeowner’s responsibility. Sometimes it’s hard to keep track of where all the potential dangers may lie and what you’re covered for. But Di Tullio offers builders some tips on how to minimize those risks.
dustry. Recently, we’ve seen a number of claims that stem from issues with improperly prepared soil, especially on ravine-adjacent land that requires engineered fill for levelling. These types of claims can be large because building a house on improperly prepared soil can result in significant movement of the foundation, which damages the structure. The soil is improperly prepared by the developer and the house settles due to the improperly compacted soil underneath it. Unfortunately, the home builder can be left with the cost of repairing the foundation and the house. OHB: Why isn’t the developer responsible if they developed the lot? MD: Builders usually assume that the developer is ultimately responsible for the improperly prepared soil, especially since they developed the lot and the builder purchased it after the fact. But in these cases, the sales contract included a Hold Harmless Agreement. With this type of agreement, one party typically agrees that the other party is free from responsibility for any liability or damage that might arise out of the sale of land. This can prohibit the builder from being able to pursue the developer for the costs of repairing the house. OHB: How common are Hold Harmless Agreements? MD: The use of them varies by province, and it depends on the demand for building lots and the economic conditions of that specific region. A highdemand region will usually include more Hold Harmless Agreements since builders are dealing with a low supply of lots and some are willing to take on the risk. For example, Alberta has had a high demand for lots over the previous years, so many developers include that agreement as part of their contract.
OHB: Are there any recent trends with
your home builder customers that you feel require greater awareness within the industry? MAURO DI TULLIO: We’re always seeing new risks that are unique to the in-
OHB: Do you have any advice on how builders can minimize these types of risk? MD: Here are a couple tips: First, research the development company you’re considering purchasing from and make ONTARIO HOME BUILDER FALL 2016
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