New things are exciting. They’re also untested. Which is why brokers must put considerable research into coverage for prototype buildings and construction materials.
Calling buildings or components ‘prototypes’ in this context doesn’t mean they’re untried, but rather that they’re not yet widely used in Canada. The term covers anything from new building designs and construction methodologies to innovative materials and products, says Bernard McNulty, chief agent of Allianz Commercial in Canada.
His firm assembles coverages for large infrastructure projects, including bridges, highways, dams, power and water treatment plants, hospitals, schools and manufacturing facilities. They also work with large residential builders.
Modular methods
One evolving innovation is large-scale prefabricated modular construction. These projects involve complex modules that are built in factories and brought to construction sites for final assembly.
“We’re seeing buildings constructed in which every room is a module [that] has the plumbing, electrical and interior [and exterior] finishes completely done and ready to go,” McNulty tells Canadian Underwriter. “It’s a great way to build, because inside climate-protected warehouse buildings, everything’s protected year-round from moisture and other concerns.”
Even roofing is applied before the module is shipped to the site, but he notes, “We’re seeing some losses around transportation of those components [and] the way they’re stored on site.” Depending on site location, modules can be moved by truck, rail or ship.
Currently, McNulty is working with clients producing a 700-room modular lodge to house oil and gas workers in northern Alberta. Each living module contains a bedroom, full bathroom and kitchenette. “It’s amazing how they stitch together those final pieces,” he says. “And the speed of the project is increased dramatically.”
Eco-friendly building is another growing coverage area for construction prototypes. In this segment, everything is cutting-edge — from design, heating, ventilation and air conditioning to lighting, windows and fire-protection systems.
“All the people-moving components…are brand new designs,” McNulty adds. “To [people] riding an escalator, [they] wouldn’t realize it’s a new design – but if it uses 40% less power and its maintenance schedule is far less than a conventional elevator or escalator, it’s a new design.”
Shock of the new
Novelty can lead to problems. For example, consider a recent loss related to an eco-friendly flooring system made from recycled products.
“It’s a type of tile, and we have a significant loss around [its] adhesion,” he says. “This product has never been used on [this] scale in Canada. It could be a problem around the product itself, it could be the surface prep or the adhesive product, and we have to sort through all that.”
Onsite visits with manufacturer representatives are often required because of Canada’s harsh climate. And it’s important to have conversations with work crews to ensure everyone understands the new product’s installation requirements. “There are issues around products that aren’t well tested in [Canada] and it can lead to losses,” he notes.
Such claims require a painstaking parsing of liability. “You have multiple policies triggered. You have the construction policy onsite, and then you’ve got the liability policies for other parties that were involved in the decision-making,” says McNulty.
“They have an opportunity to pursue any party they believe is responsible for that additional cost. And [beyond] the additional cost associated with replacing the bad components, the construction delay costs are significant, and that’s [often] a part of coverage [provided].”
This article is excerpted from one appearing in the August-September 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/JARAMA
