A church is renovating their kitchen area. Within the footprint of the existing building, they are removing all of the old kitchen equipment, adding new plumbing, electrical, ventilation, etc., and installing new built-in kitchen equipment.

There is a need to increase the values on the existing property policy but the insurer insists that a builders risk policy is necessary to do this until construction is completed. Aside from potential coverage/peril differences, the agent questions whether this is “necessary.” The existing property policy defines “buildings” to include:

If not covered by other insurance:

(a) Alterations within, or on the exterior of, the existing “buildings”;

(b) Materials, equipment, supplies and temporary structures, on or within 1,000 feet of the described premises, used for making alterations to the existing “buildings”;

The carrier interprets this as, “building coverage refers to completed alterations, not alterations in construction” but the agent questions that interpretation.

Nothing in the policy language cited above implies that this refers to completed construction. In fact, this language supports the premise that coverage extends to alterations in progress:

(b) Materials, equipment, supplies and temporary structures, on or within 1,000 feet of the described premises, used for making alterations to the existing “buildings”

In response to the agent’s inquiry, the underwriter points to this policy language to support the carrier’s interpretation that the aforementioned policy language refers to completed alterations:

Property not Covered

(1) “Buildings”; or

(2) Additions to existing “buildings”;

In the course of construction, except as provided in the Additional Coverages

New Construction

We will pay for direct physical “loss” caused by or resulting from any of the Covered Causes of Loss to:

(1) “Buildings”; or

(2) Additions to existing “buildings”;

In the course of construction at any premises, if the construction began after the inception date of this policy. We do not cover “buildings” which you construct to sell to others or for the account of others.

As used in the vernacular, a kitchen remodel is NOT an “addition” to an existing building. In fact, the definition of “buildings,” as cited in the policy language above clearly states that “buildings” includes “Alterations within, or on the exterior of, the existing ‘buildings’.” The kitchen remodel or renovation is an alteration of, not an addition to, the existing building.

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information