Towson, Maryland (PRWEB) August 29, 2011
The hurricane that hit the East Coast this weekend will clearly impact many construction projects. Presumably, the projects around Maryland that are affected by hurricane are already under contract. Contractors will have to pull those contracts out to determine the extent of their entitlement for delays and should also determine the level of insurance that they have for each project. This insurance will include builder’s risk insurance and builder’s interruption insurance.
“The first thing a contractor should do is check their contract documents to see if the hurricane is covered,” said Michael W. Siri, a construction attorney Maryland’s Bowie & Jensen business law firm, with a renowned construction law practice. “Most contracts anticipate these types of natural disasters and outline a way to resolve any issues that come up.”
Builder’s risk insurance insures against the risk of physical loss or damage to property during the course of a construction project. This type of insurance is usually written as an “all risk” basis that covers damage stemming from any cause that have not been expressly excluded. Builder’s risk insurance protects a company’s insurable interest in materials and/or equipment used for the construction.
Additionally, builder interruption insurance insures construction companies against the loss of income after a covered event interrupts normal business operations. These types of insurance policies usually covers against expenses incurred under a covered event interruption. For example, if, as a result of Hurricane Irene, a construction company cannot perform work on a project because of flooding and must remove the water in order to proceed with the work, builder interruption insurance should cover both the interruption and the costs.
Certain scenarios occurring on construction projects throughout Maryland in the aftermath of Hurricane Irene will arise from the need for time extension or compensation and not damages for materials or equipment. The entitlement to a time extension or compensation for weather delays is dictated by the construction contract. For example, the 2007 AIA A201 states "if adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction." The official commentary to the 2007 AIA A201 provides an excellent example, stating that four days of unusual rain could render the job site impassable or unworkable for seven days, but if the project is closed in, it may have no impact at all. The commentary recommends documenting unusually severe weather through records from the National Oceanic and Atmospheric Administration ("NOAA").
It is important to underscore that the weather must be abnormal. To use Maryland's current weather as an example, six inches of rain is not abnormal, but 40 mile an hour sustained winds is. Some federal government contracts, and in particular those with the Army Corps of Engineers, will define exactly how much rain or wind gusts will serve as the threshold for abnormal weather conditions.
Consistent with the AIA commentary, the contractor must not only show that the weather was abnormal but that it impacted the schedule. This is a highly factual driven analysis. For example, high winds and rains will prevent the use of construction cranes and will make certain portions of a job site impassable for many days beyond the hurricane. It could also delay material deliveries. However, assuming workers can get to the job site, it will not disrupt the running of interior conduit.
Assuming that a contractor can demonstrate the weather is abnormal and impacts the schedule, the next question is whether the contractor is entitled to additional time, money or both. In most contracts, adverse weather is an excusable but non-compensable delay. Thus, the contractor will receive only a time extension. As with most contract provisions, weather delays are a question of risk allocation, and most contracts allocate weather related risks and other "acts of God" to allow for time but not money. However, if a contractor anticipates having major equipment on the job site that will translate into significant extended general conditions costs when delays occur, the contractor should consider negotiating its contracts to allow for compensation for otherwise non-compensable delays.
About Bowie & Jensen
About Bowie & Jensen Bowie & Jensen is a Maryland-based business law firm representing clients across the United States. We focus on Business Transactions, Intellectual Property, Business Litigation, Employment Law, Commercial Real Estate, Entertainment Law, Estates & Trusts and Construction Law. For more information on Bowie & Jensen, please visit the Website at http://www.bowie-jensen.com.