Modular Insurance 101
Pictured Above: certificate of liability insurance concept
Date Posted: August 20, 2024
Posted In: Discussion, People,
From Offsite Builder: Every construction project, regardless of size, must be insured. Insurance coverage is crucial because it protects properties, equipment and crew members, and shields responsible parties from significant financial losses. Moving forward without adequate insurance is just asking for financial ruin.
Most contractors understand the importance of insurance coverage, and most have had no issue securing it for their projects. Until their first modular project, that is. Coverage may not be as easy to get as on a conventional build, despite it being just as critical, if not more so.
Even though modular has proven itself over decades, a lot of insurers are still unfamiliar with it, and that unfamiliarity can breed hesitation. “One of the biggest challenges is that modular is [considered] atypical, so insurance companies don’t know what to do with it,” says attorney Jevon Bindman, a partner and construction, real estate and insurance litigator at Maslon LLP in Minneapolis. “I think there’s a stigma where some insurance companies think modular means ‘manufactured,’ like a manufactured home. But of course, that’s not an accurate comparison.”
Differences from conventional
Bindman said that one reason insurance companies are hesitant to provide coverage for modular, is the fact that the modules aren’t built on site. When large portions of a project are assembled at a manufacturing facility that could be hundreds of miles away from where they ultimately will be located.
The manufacturer’s insurance will likely cover damage to the units, but not compensation for delays caused by that damage. Although the contractor should look at insurance to cover the gaps, there’s a need for caution. “There are potential issues of which policy is primary, and there are exclusions that could apply to the manufacturer’s policy but not the contractor’s,” according to Bindman. He says those considerations are very fact-specific so it’s hard to generalize.