Removal of Debris – the 10% standard cost may not be sufficient!
Every rebuild insurance policy will include an allowance for the removal of debris before the rebuild commences. When calculating the cost of ROD, most insurers will apply a standard 10% – which is equal to 10% of the cost of the rebuild. Is this enough?
Every construction insurance policy will include an allowance for the removal of debris (ROD) before the rebuild commences. Most insurers will apply a standard 10% – which is equal to 10% of the construction price for this.
Is 10% really an adequate allowance?
There is a logic that says that a building’s cost is relative to the difficulty of building on a particular site. For example, buildings on steep sites or those with difficult access are, invariably, more costly to build. The logic therefore follows that removing debris from a difficult site will also be more costly.
However, whether a site is originally difficult to access or not, it can become far more difficult to access if some parts of the site are blocked by the building works constructed or by the excavation carried out on it.
As the building landscape around the original building changes, the implications of ROD logistics will change as well. In one case, following an extensive fire, a barge was required to transport an excavator to the site to remove the debris – all at a very considerable cost! The site also had a road frontage, but nobody had considered that access would be required to the site other than (cheaply) via the road.
These issues need to be considered and clear from the start, but also updated as the landscape around the insured building changes. In addition, there is a need to consider the relative value of buildings compared to ROD. For example, a 10% allowance might actually be inadequate where building works of comparatively low value are added to a high value/substantial building.
Because the broker is responsible for advising on the adequacy of a client’s cover, it is important that brokers consider the adequacy of a 10% ROD allowance. It must be considered against access issues on the site to ensure the allowance is sufficient to cater for ROD from the most inaccessible parts of the building and the site – particularly when the building is nearing completion.
It is advisable to ensure builders know what their ROD policy limit is and are requested to tell their broker if that limit is likely to be inadequate on any site.