Curious to get opinions on insurance coverage for a flip I am working on. It's a single-family house. Total gut to studs and subfloors. When I closed, I bought a Builder's Risk policy for the maximum amount I could lose. Essentially, if we have a total loss on the last day of renovation, I'm covered for the amount I could lose (basically my maximum all in amount less a conservative land value). My understanding is that this policy covers me for events such as fire, flood (except for ground up water issues), extreme weather, vandalism, theft to materials, etc. This is a complicated project, involving lots of structural issues, and I decided to hire a GC to manage it. The GC has the appropriate General and Auto Liability coverage, and the subs have the same in addition to Workers' Compensation for their employees. I also own the property in a single-asset LLC.
My first question is do I need to add liability coverage for my LLC? The Builder's Risk agent is trying to sell me on a basic, premises policy that would cover injuries to non-workers I bring onsite or slip and fall/injury claims occurring outside the property. Bringing people onsite I can control, and I do, so let's assume I am not bringing anyone onsite who would sue me. My question is more about what happens when a contractor causes injury to a bystander. For example, if someone steps barefoot on a nail outside the property, what exactly happens? I want to believe they’d go after my contractor’s liability coverage, and assuming the 2MM he has is enough, we’d be ok. So does having my own liability coverage add more protection in this sort of scenario? In other words, can the injured decide that they only want to sue me and leave the contractor out of it? I’m likely going to buy liability coverage anyways, since I think there’s always a risk for someone to get injured from slip and fall type of claims, but I’m curious whether it’s actually beneficial from a construction-injury perspective.
Second question, when the renovation is finished, and we're on the market, do I need different coverage? Is this when I need to switch to a Vacancy policy, or can I keep my Builder’s Risk/Premises Liability coverage in place?
I can't answer 99% of your questions except to say that yes, it is possible that someone could get injured and sue you instead of the builder. Anyone can sue just about anyone for just about anything. The key is will they win? Who knows? But in the mean time, you're now distracted with a mess plus having to pay lawyers. Does that mean I think you should get the coverage? Nope. I wing it on this sort of thing when I probably shouldn't. But to be safe, I'd check with a lawyer.
Maybe you'll get lucky and a lawyer will see this and answer. :-)
@Account Closed Cones, lineators, and Danger tapeline will help. Once they enter a tapeline without permission, the liability has little bearing. I can’t answer any investor related questions it is the job of your agent to find out your needs and what your policy covers.
Account Closed Yes. Get it. We pay our 12 month policies when in escrow and then we get refunded when we sell. We use this as our float fund for admin and marketing expenses.
A good insurance company that works with flippers that can give you good advice on coverage you need is NREIG.
Thanks everyone for all the insight.
@Manolo D. Good idea on the cones, danger tapeline, etc. It doesn't hurt and definitely helps shed some liability for anyone entering the property. The front sidewalk is mostly what I'm concerned about. I own the front sidewalk, but it's of course a public thoroughfare. I'm worried about someone tripping, stepping on a nail, etc.
@Shawn Ward Thanks for the NREIG recommendation. I'll look into them. What do you think a reasonable price is for basic premises liability coverage? I think my current agent quoted $800/year, and I'm guessing I'll have to guarantee around half of that (this flip will be done - and hopefully sold - in 3-5 months). I'm going to end up getting coverage, but I still wish it would do more for me. This property is on a quiet street; the sidewalk may get 1-2 people walking across it per hour, and it's kept in good shape. I sweep it every day, and I'll continue to take proper care in the winter. It's also owned by a single asset LLC. The risk is low.
What do you normally do for property insurance when it's finished and listed for sale? Do you switch from Builder's Risk to Vacancy...or something similar?
Account Closed What makes you think that my comment was only an "idea"? Your question to liability coverage is so green that any insurance agent can answer it, you need to equip yourself more knowledge to understand your own policy, insurance agents will pass on the liability to you aka read all your paperwork before signing, and if it hits the fan, they will tell you that it is not covered by the policy. CGL will not cover everything, so if someone trips within our construction zone when we have our cones and safety precautions, we are not liable, no cones, we are. It is the same as putting a "Caution: Wet floor" in the mall, so, it is not an "idea".
@Manolo D. The definition of an "idea" is: a thought or suggestion as to a possible course of action. I'm pretty sure you gave me an idea to focus on increasing the awareness of the construction activity in the public right of way. My question was specifically about my LLC's liability to the space outside my property that the public interacts with. This isn't a question of me not understanding my policy. My LLC does not have a liability policy for this project. That is the whole point of my question. Please read my post more clearly next time, or don't comment. Your post is barely coherent.
@Account Closed It is not an idea, it is a fact. Your single asset and most probably single member LLC will most likely be pierced, the court will find it that you were simply hiding under a corporate veil. You came here with a question of liability, where your contractor’s liability stops and yours or your LLC’s begin, so you could cover it from there, it is very simple question. I gave you a fact on “what to do” under “construction-injury” perspective as that is what you asked, yet you think it was a mere “idea”? You kiddin?
@Manolo D. Ok, thank you so much for all your facts. I will write everything you've said in stone. And when we have a lawsuit from someone who trips on a construction cone, I guess I will sue you for bad information.
WHOA! Account Closed, this has gone WAY TOO FAR! Alex asked a question. Manolo tried to answer and somehow this got WAY out of hand! You two need to just block each other and be done with it before one of you gets in trouble on the site!
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