By SPJ Adjusting Services – Insurance Appraisals
Construction projects are full of moving parts: deadlines, budgets, and countless dependencies. When an unexpected event such as fire, theft, vandalism, or severe weather hits, the results can be much more than materials or delayed timelines; instead, they may contribute to some large financial ripples.
One of the most overlooked categories of loss in these situations is Insurance and Soft-Cost Claims indirect expenses that pile up when construction grinds to a halt. Understanding how to recover these losses under your Builders Risk Insurance policy can make a major difference in your project’s financial recovery.
What is Builders Risk Insurance?
Builders Risk Insurance, also referred to as Course of Construction Insurance, is a type of insurance policy that covers construction projects against direct physical loss or damage while a project is still under construction. Most policyholders know it covers tangible materials such as wood, steel, and fixtures.
What most property owners and contractors don’t realize, however, is that Builders Risk can also cover the financial losses due to project delays, which is where the concept of soft cost coverage comes in.
What are Soft-Cost?
Soft costs are the indirect financial losses due to a covered delay. These are costs that wouldn’t have existed if the project had stayed on schedule.
Common examples include:
- Extra loan interest or financing charges during the delay
- Extended equipment rentals and site security costs
- Increased architectural and engineering fees
- Additional permit, inspection, or utility costs
- Marketing and administrative expenses due to delayed openings
While these costs might seem secondary, they can add up rather quickly, especially in huge commercial projects where each day of delay impacts negatively on both revenue and reputation.
Why Insurance and Soft-Cost Claims are So Challenging
Filing a Insurance and Soft-Cost Claims under a Builders Risk policy can be complex. Often, insurance carriers take a very strict approach and may:
Require extensive documentation showing that the delay was due exclusively to an insured event
Request detailed financial records that tie each cost to the insured loss
Impose specific sub-limits or caps on soft-cost recovery
Challenge timelines or argue that certain expenses are part of normal project overhead
Insufficient professional advice leaves many policyholders underpaid or denied altogether.
Real-World Scenario in El Paso, TX
Suppose there is a commercial development undertaking Insurance and Soft-Cost Claims in El Paso that faces fire damage just weeks before completion, in which part of the electrical system gets destroyed, thus halting progress for two months.
During this period, the developer is still obligated to pay interest on construction loans, rent for storage units, and extended contracts for specialized contractors. Each of these costs constitutes a soft cost, but only if the insured can prove they arise directly from the fire – the covered peril.
This is where a professional insurance appraiser can make the difference between partial reimbursement and full recovery.
Key Steps to Protect Your Builders Risk Claim
Whether you’re working in El Paso or anywhere else in the United States, if you have a construction project in process, taking proactive steps before and after a loss will significantly enhance your position and aid in the success of the claim.
1. Review Your Policy Before Construction Begins
Understand the exact scope of your Builders Risk coverage, particularly sub-limits and definition of “soft costs.” This coverage may not be automatically provided in all policies.
2. Track all project expenses
Keep organized, detailed records of all costs: contracts, invoices, loan statements, and project schedules. The more precise the documentation, the stronger your claim.
3. Document the Cause of Delay
Keep clear evidence showing how the delay directly ties to a covered event: fire report, weather records, police reports.
4. Employ an Insurance Appraisal Expert Early
Working with professionals like SPJ Adjusting Services will ensure that your soft-cost damages are correctly calculated and properly justified in the appraisal process. This can help prevent unfair denials and maximize recovery.
Why This Matters: In El Paso, Time is Money
Meanwhile, the construction market is booming in El Paso, but that also means timelines are tight and financing costs are quite high. Delays of even some weeks can be projected across multiple contracts, at lenders, and into project phases.
Understand how Builders Risk Insurance handles soft-cost claims, and prepare your documentation early to help protect your bottom line when those unexpected setbacks occur.
Get Expert Help with Your Builders Risk Claim
If your Builders Risk Insurance claim has been delayed, underpaid, or denied, SPJ Adjusting Services can help. Our experienced insurance appraisers and umpire professionals are especially suited to deal with complex construction claims, including soft-cost evaluations.
