April 26, 2004

Insurance Information Notice 2004-3

SELF-INSURED BUILDER’S RISK COVERAGE

Effective July 1, 2004, the Office of Risk Management (ORM) will provide builder’s risk insurance coverage on behalf of contractors/vendors for all types of construction projects.

During the past fiscal year, the contractor was required to provide builder’s risk insurance on all new construction, projects that involve foundations or underground work, or any renovations over $250,000. All projects with project start dates July 1, 2004 and after will be eligible for builder’s risk insurance through the ORM self-insurance policy. Projects beginning before July 1, 2004 will continue to follow the recommendations found in Insurance Information Notice 2003-5 dated June 6, 2003 (http://doa.louisiana.gov/orm/uwnot.htm).

A large majority of construction projects are processed through the Facility Planning & Control Section (FP&C) and the Office of State Purchasing Section (OSP) of the Division of Administration. FP&C and OSP are in the process of changing their construction contracts/bid documents accordingly. If your agency does not utilize FP&C or OSP for construction contracts/bids, you should take the steps to change the language in your contracts/bid documents to reflect that the State of Louisiana will be providing this coverage on behalf of the contractor on those projects with commencement dates of July 1, 2004 or later. Suggested contract wording is shown on page 2 of this notice.

Agencies must notify ORM in writing to have the project scheduled onto the builder’s risk policy. This is a scheduled policy only. If an agency does not notify ORM to add a project to the policy, then it will not be covered in the event of a loss, and the agency may have to assume the cost of the loss. Page 3 of this notice specifically states the information that ORM must have to add a new project to the policy. It also includes the minimum information ORM must receive to delete a project from the policy when it is completed and accepted. All projects handled through FP&C and OSP are reported to ORM and do not need to be reported by the individual agencies.

Once coverage has been initiated and until the acceptance notice of the completed project is received by ORM, your agency will receive a monthly premium invoice for the builder’s risk coverage. It is important that ORM be notified immediately in writing when a project is completed and accepted, because we will continue to charge your agency for the premium not knowing that a project is complete.

The self-insurance policy effective July 1, 2004 has been designed very similar to the commercial policies ORM has obtained on behalf of the contractors in the past. There is one significant exception: this new policy will not provide any coverage for contractor’s tools and equipment. The contractor is responsible for a $1,000 deductible for all covered causes of loss, except flood, and a $5,000 deductible for flood losses.

Insurance Information Notice 93-5 dated March 26, 1993 (also found on http://doa.louisiana.gov/orm/uwnot.htm) describes when builder’s risk is required and when it is not. Any routine maintenance, repair or remodeling projects costing $50,000 or less, not handled by FP&C or OSP and which would not significantly change the value of the building, are not required to be covered by builder’s risk insurance.

If you have any questions or need additional information, please contact Melissa Harris at (225) 342-8414 or by email at Melissa.Harris@la.gov.

SUGGESTED CONTRACT WORDING FOR BUILDER’S RISK COVERAGE

Unless otherwise provided, the Owner shall purchase and maintain property insurance upon the entire work at the site to the full insurable value equal to the contract sum plus all amendments.

The State of Louisiana is to provide Builder’s Risk Insurance to protect the Owner, Contractor, and Sub-Contractors as their interests may appear. The policy is subject to the following deductibles, which will be paid by the Contractor:

All covered causes of loss, except flood $1,000 deductible per occurrence

Flood cause of loss $5,000 deductible per occurrence

The policy insures against “all risk” of direct physical loss or damage subject to certain exclusions and limitations. A copy of the current policy can be found at the Office of Risk Management website at http://www.doa.louisiana.gov/orm/uw.htm. It is the Contractor’s responsibility to review this policy and, if additional insurance is determined to be needed, to purchase the additional insurance to protect the Contractor and Sub-Contractor interest in the project.

Inquiries concerning the Owner’s insurance policy shall be sent to the address shown below. In the event of a loss or claim, please notify the Office of Risk Management at the telephone number shown below, with confirmation in writing, providing all pertinent information, such as date of loss, type of loss, approximate extent of damage, location, and project number.

Division of Administration

Office of Risk Management

Post Office Box 91106

Baton Rouge, LA 70821-9106

(225) 342-8500

ORM Builder’s Risk Insurance Request for Coverage

Minimum Required Information

State Agency Name

State Agency Contact Name

State Agency Contact Telephone

Contractor Name

Contractor Address, City, State, Zip

Contractor Contact Name (if available)

Contractor Contact Telephone

Project Number/PO Number

Construction Class

Project Description

Project Address, City, State, Zip (if available)

Project Start Date

Original Project Cost/Contract Amount

Estimated Project Completion Date

ORM Builder’s Risk Insurance Request for Cancellation of Coverage

Required Information

State Agency Name

Contractor Name

Project Number/PO Number

Project Description

Project Address, City, State, Zip

Completion Date/Date of Acceptance

Completed Project Cost/Contract Amount

MAIL OR FAX ALL PROJECT NOTICES AND OTHER CORRESPONDENCE TO:

Mona Propes

Office of Risk Management

P. O. Box 91106

Baton Rouge, LA 70821-9106

Telephone: (225) 342-8468 Fax: (225) 342-3845