Winter damage at construction sites – is there insurance?

Oct 20, 2021

"It's autumn with the cloud." Every year with the arrival of autumn, there are two basic assumptions that are indisputable. The first is that we don't know what kind of winter we are likely to have (rainy or mild) and the second is that it is difficult to predict powerful and extreme storms except a few days before they occur.

Since construction sites do not cease their activities in the winter and since storms and hurricanes can cause significant damage, it is necessary to understand the insurance angle of the issue. That is, to what extent does contractor insurance cover winter damage and, more importantly, when the policy is deficient.

The first rule: awareness

The first and basic rule regarding winter damage and contractor work insurance is awareness of the likelihood of damage occurring on the part of the insured . In other words, the insured contractor/developer must recognize that rainy days put him at a very significant risk of absorbing various damages. Starting from bodily harm (as a result of work accidents due to activity in extreme conditions), through property damage to equipment and the structure, and ending with indirect damages due to dramatic delays in the project completion schedules.

Below are examples of several cases from recent years that were handled by our insurance agency, which has specialized for about 33 years in complex construction insurance for construction projects:

"It's autumn with the cloud." Every year with the arrival of autumn, there are two basic assumptions that are indisputable. The first is that we don't know what kind of winter we are likely to have (rainy or mild) and the second is that it is difficult to predict powerful and extreme storms except a few days before they occur.

Since construction sites do not cease their activities in the winter and since storms and hurricanes can cause significant damage, it is necessary to understand the insurance angle of the issue. That is, to what extent does contractor insurance cover winter damage and, more importantly, when the policy is deficient.

The first rule: awareness

The first and basic rule regarding winter damage and contractor work insurance is awareness of the likelihood of damage occurring on the part of the insured . In other words, the insured contractor/developer must recognize that rainy days put him at a very significant risk of absorbing various damages. Starting from bodily harm (as a result of work accidents due to activity in extreme conditions), through property damage to equipment and the structure, and ending with indirect damages due to dramatic delays in the project completion schedules.

Below are examples of several cases from recent years that were handled by our insurance agency, which has specialized for about 33 years in complex construction insurance for construction projects:

Water infiltration into apartments in an urban renewal project

Urban renewal projects according to TAMA 38/1 (reinforcement and renovation) are carried out in inhabited buildings. In one of these projects in Tel Aviv, which was carried out in a cluster of old railway buildings, a strong storm caused water to enter the apartments. The damage was so significant that there was no choice but to evacuate about 25 apartments and move their residents into alternative apartments in one of the most expensive areas in Israel in terms of rent. The insurance question in dispute is whether the storm was expected or unexpected (?).

There are cases where the date on which the damage occurred is a key factor in dealing with the insurance company in receiving (or not receiving) coverage. This was one of the issues at issue in a case in Bat Yam where an unusual storm in May caused dramatic damage to a construction project. The winter months were defined in the policy until April 30th and the insureds claimed that since the damage occurred in May, which is defined as a summer month, the rains should be considered an unexpected event. In a sidebar, we note that in many new policies, insurance companies have already made adjustments and the definition of the end of winter is mostly moved to the middle or end of May.

Is May winter or summer?

Almost every winter we are exposed to the severe drainage problems in cities, especially in the older centers. Municipal drainage failures float on the surface, literally, and just as water floods parking lots and residential buildings, it can cause damage to construction sites. This is an event that, in exceptional cases, can turn the construction site into a "pond/swamp" that causes enormous damage to equipment and tools. A case of this type was handled by our agency several years ago regarding a construction site for a hotel in the central area.

When the city floods, construction sites are flooded too

Why is there no insurance coverage for winter damage?

Insured developers and contractors need to understand that insurance companies do not take uncalculated risks, and this is reflected in their approach to the rainy season.

Most insurance policies for contracting work are marketed subject to the "Bit Conditions" specification and include an exception for expected damage by defining the insured event as unexpected damage . Contractors and entrepreneurs who do not address these nuances when contracting with insurance companies may find themselves without a response and without coverage on a rainy day .

The principle here is anticipation . Insurance is designed to provide a response to cases of sudden, unexpected physical damage. Since winter rains are an expected and familiar occurrence, when they cause damage, a dispute can arise between the insured and the insurer as to the extent to which they are exceptional.

Should the insured absorb every rainy event, including storms of unusual intensity? The answer is not unequivocal . Over the years, there have been cases in which insurance companies have provided coverage for winter damage when meteorological evidence was presented regarding unusual and exceptional storms. It should be emphasized that this is not a trivial matter, as even "very rainy" days do not necessarily amount to unexpected storms. Developers and contractors who seek to be covered by insurance due to storm damage at the construction site are required to seek the advice of experts in the field of meteorology, who may even be required to be questioned about their opinions in legal proceedings.

Why is there no insurance coverage for winter damage?

The end of an act with forethought - and the importance of documentation

Similar to various issues in the insurance field and as in the well-known poem "Lecha Dodi", one of the best rules for winter damage insurance is " The end of a work is as good as the beginning ." The more the developer/contractor takes care to prepare the construction site for winter in advance, especially on rainy days or before expected storms, the better (see here an article about " Preparing the Site for Winter ").

Preparing for winter in advance can prevent unnecessary events from occurring and, as a result, eliminate the need for insurance. Furthermore, if damage occurs to the site as a result of a storm or gale, the contractor/developer will be able to prove that they took all reasonable measures to avoid it.

Also pay attention to the issue of documentation . It is advisable to carry out preparations for winter in conjunction with receiving professional advice from experts and engineers, as well as to document the actions taken . Preparations for winter should not be superficial or a forced act. They must be professional, real, effective, well-founded and documented. The more professional and thorough the preliminary conduct, the more well-founded the claim for insurance coverage for event controls will be.