The Chiller Drop: Installation Floater vs. Builder's Risk
Grove Mechanical Contracting is installing a $350,000 custom air-handling unit in a new hotel. The unit is delivered to the job site and stored under a tarp. The project owner has a builder's risk policy covering the project, including materials and equipment to be installed. Grove has a commercial general liability policy, a BPP policy with a $100,000 limit and a $10,000 property-off-premises extension, and an installation floater with a $500,000 limit. The installation floater covers property to be installed by Grove until the project owner accepts it. During a lift to the roof, a sling fails and the unit falls, causing $280,000 in damage. The unit had not been connected or accepted. Grove's BPP insurer denies the claim, saying the unit was in the course of installation. Grove's installation floater insurer says the builder's risk policy should pay first because it also covers the unit. The project owner's builder's risk insurer has not yet responded.
1. Which policy or policies should respond to the $280,000 loss, and what facts determine priority? Explain the role of the installation floater and the BPP denial.
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The installation floater is the intended coverage. It covers machinery, equipment, and materials that the insured contractor is to install, while in transit, at the job site, and during installation, until the owner accepts the work. The unit was still in Grove's control, not connected, and not accepted, so the floater's coverage period had not ended. Grove's BPP denial is likely correct: the BPP form covers business personal property, but property in the course of installation is commonly excluded or limited to the small off-premises extension. The $10,000 extension is far below the $280,000 loss. The builder's risk policy may also cover the unit because it covers materials and equipment intended to become part of the project. Priority depends on the other insurance clauses. Many installation floaters are written to be excess over any other insurance covering the same property, while some contribute pro rata. The adjuster must read the floater's other insurance condition and the builder's risk policy's insured/covered property provisions. If the builder's risk is primary, the installation floater may pay only the excess, if any. If the builder's risk excludes contractor-controlled property or has a large deductible, the floater may respond first. The CGL policy does not cover damage to property in the insured's care, custody, or control, so it is not a source.
2. What facts would end the installation floater coverage, and how would the analysis change if the unit had been installed and accepted the day before the loss?
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Installation floater coverage typically ends at the earliest of: (1) the insured's interest in the property ending; (2) the property being accepted by the project owner; (3) the policy expiration; or (4) the period stated in the declarations. The acceptance can be express or implied by the owner's use or payment. If the unit had been installed and accepted the day before the loss, the floater would no longer cover it. The unit would then be part of the real property or the owner's project, and the builder's risk policy (or the owner's permanent property policy after completion) would be the proper source. Grove's BPP policy would not cover it because Grove no longer has an insurable interest in the installed unit, and the unit is not Grove's business personal property. The CGL policy would still not respond to damage to property in Grove's care, custody, or control. The result would likely be a builder's risk claim, subject to that policy's deductible, limits, and any exclusion for testing or acceptance. Grove should document the acceptance date and update its floater schedule.