Managing Project Delays and Stoppages

Construction projects are frequently delayed or temporarily halted by adverse weather, permit problems, labor shortages, supply chain disruptions and financing challenges. These setbacks not only push back a completion date; they can change the risk profile of the entire project. Proactive planning can help employers limit financial losses and keep a project protected from start to finish.

This newsletter outlines key exposures stemming from project delays and stoppages and offers tips to help construction companies manage related risks.

Business Risks of Delays and Stoppages

Delays carry financial and operational consequences for contractors and project owners alike. In addition to a longer timeline, companies commonly face increased project costs, extended equipment rental and labor expenses, reduced cash flow and lost productivity. Insurance costs can climb, contractual deadlines can be missed, and repeated or lengthy delays can strain client relationships and damage a company’s reputation.

Consider the following additional risks that project delays or stoppages can create for businesses:

• Insurance risks—Builders risk insurance is written for a defined construction period, so coverage can lapse if a project runs past its original completion date. Extensions are never guaranteed. Delay-in-completion coverage, where it exists, typically applies only to lost income from physical property damage, not to schedule slippage from permitting, labor disputes or financing struggles. Idle or vacant jobsites may also trigger separate policy conditions or exclusions. A policy left unreviewed as timelines shift can quietly develop coverage gaps.
• Idle jobsite risks—An idle worksite is a more vulnerable one. Combustible debris, temporary utilities and unattended electrical systems can spark fires that spread quickly without site supervision. Partially completed structures left exposed to the elements are prone to water infiltration, frost and mold. Reduced visibility and lighter security also make theft, vandalism and trespasser injuries more likely.
• Contractual risks—Missing a contract’s completion date can trigger a liquidated damages clause, a daily penalty that applies whether or not physical loss caused the delay, which is why delay-in-completion coverage typically won’t respond. Since completed operations coverage doesn’t begin until the project is finished, mismanaged builders risk coverage during a delay can open a liability gap at wrap-up. Contracts should be reviewed for force majeure, extension-of-time and indemnification provisions.

How to Reduce Risk

Considering the implications, construction employers should follow these steps amid potential delays:

• Notify your insurance carrier as soon as a delay looks likely. Waiting can limit extension options and lead to more restrictive terms.
• Review builders risk coverage and policy expiration dates, and confirm what a delay-in-completion endorsement does and doesn’t cover.
• Secure idle jobsites with fencing, lighting, alarm systems and security cameras.
• Remove or securely store high-value equipment and combustible materials, and weatherproof partially completed structures.
• Document project inventory with photos and serial numbers, and conduct routine safety inspections throughout the delay.
• Review project contracts to understand notice requirements, liquidated damages exposure and who is responsible for delay-related costs.

Project delays are often unavoidable, but the risks they create can be managed with proactive insurance reviews, jobsite security and careful contract management. Before a delay becomes prolonged, talk with your insurance advisor to make sure your coverage still fits the project.

Contact us for more construction risk management resources.

Article Published By: Zywave, Inc.