01-32_GENERALS_SUMMER25_PT - Flipbook - Page 24
ENGAGEMENT
NAVIGATING INSURANCE LAPSES
How to navigate insurance lapses and handoff processes in construction projects
By DAVID RAE
C
ONSTRUCTION PROJECTS ARE INHERENTLY
COMPLEX, involving multiple stake-
holders and numerous moving
parts. As those stakeholders
manage their project’s lines of
coverage, including builder’s risk
and/or wrap-up liability insurance, it is
essential to consider, and balance, construction contract obligations with the
specific terms and conditions of each line
of coverage.
This often-misunderstood nuance
raises questions about when project insurance should cease and when coverage
should be implemented by the owner.
Canadian Construction Documents
Committee (CCDC) contract versions
from 2013 and earlier stipulated that
once substantial performance of the
work was awarded, the insurance
policies purchased by the developer or
contractor would continue providing
coverage for 10 calendar days. Afterwards,
responsibility for securing coverage
would shift to the project owner. This
seemingly straightforward process can be
ambiguous, especially with the moving
target of substantial performance not
being de昀椀ned within the contracts.
Ready-for-takeover
Over time, various issues have emerged
in the process of handing over projects
deemed to be completed to the owner.
For example, an owner may be unaware
of the location of the main water shuto昀昀
valves during a leak, leading to signi昀椀cant
complications. This concern prompted the
CCDC to update several standards and introduce a ready-for-takeover framework.
As of June 2025, the CCDC 2 (stipulated price), CCDC 5A/5B (construction
management), and CCDC 30 (integrated project delivery) have implemented
ready-for-takeover considerations, with
the CCDC 14 (design-build) set to follow
in early 2026. These updates clarify that
insurance policies related to the project
can lapse 10 calendar days after the project is considered ready for takeover.
While there are eight prerequisites
for a project to be considered ready for
takeover, the number that may need
to be ful昀椀lled depends on the contract,
underscoring the importance of carefully
reviewing the speci昀椀c contract before
deciding to lapse coverage.
The prerequisites to attaining readyfor-takeover of the work, as outlined by
the CCDC, are limited to the following:
1. THE CONSULTANT HAS CERTIFIED OR VERIFIED the
substantial performance of the work.
2. EVIDENCE OF COMPLIANCE with the requirements for occupancy or occupancy permit
as prescribed by the authorities having
jurisdiction.
Irrespective of the contract type or specific considerations
outlined in the builder’s risk policy, it is important to establish an
internal protocol for the property insurance handoff process.
24 the generals • SUMMER 2025
3. FINAL CLEANING AND WASTE REMOVAL at the time
of applying for ready-for-takeover, as
required by the contract documents.
4. THE DELIVERY TO THE OWNER of such operations
and maintenance documents reasonably
necessary for immediate operation and
maintenance, as required by the contract
documents.
5. MAKE AVAILABLE A COPY of the as-built drawings completed to date on site.
6. STARTUP TESTING REQUIRED of the as-built
drawings completed to date on site.
7. ABILITY TO SECURE ACCESS to the work has
been provided to the owner, if required by
the contract documents.
8. DEMONSTRATION AND TRAINING, as required by
the contract documents, is scheduled by
the contractor acting reasonably
Policy considerations — Project insurances
Regardless of whether your project is
based on CCDC contract standards or another form, the terms and insuring agreement of the builder’s risk insurance policy
must be carefully considered to minimize
the risk of construction insurance lapses.
While most builder’s risk policies allow
the owner to occupy the space before work
is complete, there is a distinct di昀昀erence
between occupancy and using the space
for its intended purpose. Permission to
occupy is intended to allow the owner to
begin moving owned items, such as stock,
o昀케ce equipment, furniture, or other speci昀椀c similar 昀椀ttings, into the space.
However, some builder’s risk policies
may specify that once the space is used
for its 昀椀nal intended purpose, the policy
will automatically cease. Additionally,
most builder’s risk policies state that if
activity on the project site, as de昀椀ned
in the contract, ceases for more than
an established number of consecutive
days, coverage will lapse. Both older and
current versions of the CCDC contract
contain similar cessation of coverage
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