A recent ruling by the Eighth Circuit Court of Appeals has highlighted the importance of how parties are listed on builders risk insurance policies, particularly for property owners involved in construction projects. In the case, a property owner attempted to claim lost rental income and soft costs due to a construction delay. However, because the owner was classified as an additional named insured rather than the named insured, the court determined that coverage for those losses did not apply.
The court's decision was based on a strict reading of the policy language under Missouri law, which prioritizes clear terms even if outcomes seem counterintuitive. The property owner argued that it made little sense for general contractors—who are often named insureds—to receive rental income loss coverage since they typically do not experience such losses. Nonetheless, the court upheld its interpretation.
This situation serves as a reminder to property owners not to assume comprehensive coverage simply because their name appears on an insurance certificate. Builders risk policies are frequently purchased by general contractors, making them the named insured and tailoring coverage primarily to their risks. Owners should carefully review full policy documents to understand how they are classified and what protections actually apply.
There is a significant difference between being listed as a named insured versus an additional named insured or another party type; these distinctions affect who receives payments and under what circumstances. If becoming a named insured is not possible, specific endorsements can be added to extend certain coverages—such as loss of rents or delay expenses—to additional named insureds. These extensions must be clearly defined in policy documents.
Coverage for project delays is not automatically included in most builders risk policies. Property owners relying on rental income or meeting lease deadlines should ensure that "delay in completion" or "delay in start-up" provisions are included and applicable to their role within the project.
Soft costs—which can encompass various expenses during construction delays—are defined differently by each insurer. It is important for owners and developers to make sure policy wording aligns with their actual budget exposures.
While this case was decided under Missouri law, other states may interpret similar disputes differently. For this reason, working with knowledgeable brokers who understand both construction insurance products and real-world legal outcomes is recommended.
AssuredPartners’ construction practice collaborates with property owners, developers, and general contractors from early stages to help structure appropriate insurance programs tailored to each project's needs.