Made with FlowPaper - Flipbook Maker
CONTROL THE CONTROLLABLE COVID-19 AND BUILDERS RISK INSURANCE 2020 BATH DESIGN Dallas • Fort Worth | September 2020 A HOMEBUILDING INDUSTRY PUBLICATION Therma-Star™ A Disruptive Force In the Affordable, Resilient, and Sustainable Home Market Chris Lynes, Bill Jinkins, Bennet Frazier23 Building Savvy [from the publishers] Truly during the coronavirus pandemic, our homes have been our refuge. Many are saying that the new reliance on home will persist long after the pandemic subsides. And this makes your role as a provider of housing particular- ly important as we look ahead into the third decade of the 21st century. Some of you will grasp change as opportunity, leading the way with new home designs that answer to the things that post-pandemic buy- ers will put a priority on. Flex rooms, indoor air quality and outdoor spaces have been the top- ics of discussion of late, and our Building Savvy Focus Section calendar is timely in addressing many of these areas. Inside this issue, we explore baths, where the number-one design goal is to create a spa-like experience with a feeling of the outdoors. And stay tuned for next month’s feature on outdoor living areas — even more important today than they were before. The way we sell and market our products in the reality of a changed world is another area of opportunity for those willing to change. We will continue to bring you examples, ideas and success stories illustrating the new normal for our industry. How are you coping? DISCLAIMER: Any articles included in this publication and/or opinions expressed therein do not necessarily reflect the views of N2 Publishing but remain solely those of the author(s). The paid advertisements contained within the Building Savvy magazine are not endorsed or recommended by N2 Publishing or the publisher. Therefore, neither N2 Publishing nor the publisher may be held liable or responsible for business practices of these companies. NOTE: When community events take place, photographers may be present to take photos for that event and they may be used in this publication. As we adapt and evolve, so will careers in our industry. But in order to entice the talent, we need over the next couple of decades, we must improve the safety record on our job sites. The sobering fact says one of every five work-related deaths in the private industry is construction-related. Read our Savvy Special Report on Jobsite Safety Stats on dfwbuildingsavvy.com. Building Savvy’s goal is to offer suggestions and ideas that inspire you to tweak your pro- cesses, your product and your brand. Thanks for your readership! Beverly and Steve Smirnis beverly@buildingsavvy.com steve@buildingsavvy.com (817) 975-7235 “What makes challenges, in business and in life, even more difficult is they’re not set out as neatly as hurdles on a track. They pop up unexpectedly.” – Paul Evans4 Building Savvy Pandemic Leads To A Buying Frenzy Housing Inventories Fall Short. The U.S. homeownership rate soared to the highest level since 2008 in the second quarter, and the D-FW area certainly played its part in upping that national statistic. The Dallas Morning News said the number of home sales in North Texas far exceeded expectations with a 25% increase in July from a year ago to the largest ever single-month sales total. This sealed Dallas-Fort Worth’s position at the top of the country’s top homebuilding markets, with almost 40,000 annual home starts at the midpoint of 2020. July’s sales spike follows a 16% annual increase in June. The gain for July was enough to boost the area’s total sales for the first seven months of the year by 3% from the same period in 2019, according to data from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems. “August was the new May,” cites a recent headline from HousingWire, speaking of new home sales nationally. The COVID-19 pandemic appears to have merely pushed forward the bulk of home-buy- ing activity this year. High sales in the summer [industry news] The Good: The Bad: Material Prices, Tight Lending, Underlying Conditions The Ugly: months made up for spring sales missed due to Covid-19 in many locales, and fall numbers are expected to be more typical of summer months, most housing analysts predict. Headlines say the buying frenzy is a result of the low interest rate environment, lack of home inventories, and the dawning realization that our homes may be the sole place where we work and play-- not only now, but also in the future. Stats show that Americans of all ages, races and incomes are moving away from urban centers in favor of more space (indoors and out). First-timers looking to get out of rentals and corporate transferees coming into the area will continue to create a healthy buying pool in the local area, however, at less than a 2-month sup- ply, housing inventory is now the lowest it has been in more than three years. Realtors report only about 16,000 single-family homes were listed with real estate agents in the more than two dozen North Texas counties as of the end of July, 40 percent lower than a year ago; they 5 report that the drop in home listings has caused bidding wars for houses and a severe shortage of properties priced under $300,000. North Texas home prices were up 9% with the median price at $294,200 — the largest such annual increase in more than a year. In addition to low inventory, soaring lumber prices and supply shortages are a threat to affordability and pose a serious threat to housing nationwide and the U.S. economy, NAHB reports. Citing an 80% increase in lum- ber prices since mid-April, and a price hike of 138% on oriented strand board prices over the past year, NAHB sent a request to the Trump administration asking for them to urge domestic lumber producers to ramp up production, and to work with Canada on a new soft- wood lumber agreement that would end tariffs which are currently averaging more than 20% on Canadian lumber shipments into the United States. Tight lending practices and lending costs are other potential dampers. Fannie Mae and Freddie Mac announced they will charge a 0.5% fee on refinance mortgages they purchase as of Sept. 1, a move that NAHB and 19 other housing and banking organiza- tions has stated is ill-conceived and could not have come at a worse time. The New York Times reports that qualifying for loans has become more trying, even for well-positioned borrowers, as lenders tighten their standards, often requiring higher credit scores, heftier down payments and more documentation. Its report points to the fact that it’s hard for lenders to determine if temporary government support could be masking an underlying condition due to the fact that borrow- ers have been able to pause mortgages, halt student loan payments and delay paying their tax bills. The COVID-19 pandemic appears to have merely pushed forward the bulk of home-buying activity this year. 6 Building Savvy COVID-19 Two high-profile issues with respect to mak- ing claims for business interruption due to COVID have been “direct damages” wording of the policies, as well as the presence of virus exclusions on most policies. The direct damages wording states that in order to file a valid claim, your property has to have suffered direct damage. Courts as far as New York state have consistently failed to agree that COVID-19 constitutes “direct damage” to a facility or project. If you are making a claim, you’ll need to develop a detailed list of financial impacts your business is expe- riences as a result of any civil authority or Emergency Orders issues that restrict access to an insured location, as well as how these actions disrupt your supply chain for mate- rials, equipment, inventory and labor. Lost revenue and missed business opportunities due to delays, job site or project shutdowns, expenses associated with working remotely, additional cleaning costs, and salaries paid to employees who are ill and absent should also be noted. [best practices] By Ross Conner, Hotchkiss Insurance Agency, LLC If and when something like the coronavirus happens again, it will be necessary to report both preventative measures and actual in- fections to your insurer. Builder’s risk policies cover a wide range of losses for construction projects unless they are specifically excluded. The coverage may be for hard costs, soft costs, loss of rent or income, among others. To avoid a declined claim due to unreported “increased hazard” and to preserve the esca- lation clause (due to major changes to claims costs) in a policy, documentation and prompt notification is vital. Some builder’s risk (BR) policies are written such that they void cov- erage if an “increased hazard” is not reported to the carrier. Most BR carriers will consider a coverage extension known as an “escalation clause,” which can serve as a helpful backstop in a crisis situation. Barring upfront known or foreseeable cost adjustments, this wording allows for an automatic increase in coverage limits should the final contract value exceed a stated percentage versus the original amount (typically 5% or 10%). We all pray the COVID-19 crisis will be past us for good soon. But the pandemic will forever change the way we think about certain things and perhaps better prepare us for another episode of this magnitude. New laws will likely mandate specific policy forms, endorsements and language in your insurance policies, and limit coverage through exclusions. W Will Have a Lasting Effect on Builder’s Risk Insurance7 Building Savvy Savvy homebuilders should take action now to review their BR and property coverage, and consider Business Interruption and Extra Expense Coverage with their agent. Other exclusions or limitations to watch out for in a BR policy are “cessation of work” and “abandon- ment.” Some policies void or reduce cessation of work after a certain time period, or may void coverage if work is stopped for a reason other than what is specifically outlined in the policy. Project abandonment clauses in some policies can also be trouble- some. Contract abandonment is when both parties involved in a binding con- tract have conducted themselves in a manner where the original contract is no longer valid. Abandonment is defined as “when the contractor does not start on the project in a reason- able amount of time, if the contractor is unable to complete the agreed upon work, or if the contractor fails to resume their work in a reasonable amount of time.” Property insurance often covers lost income while a business is closed due to property damage, but doesn’t always contain provisions that protect a business that is unable to reopen after an evacuation. As stat- ed before courts across the country are split on what constitutes “direct physical loss” covered by a peril, and most casualty insurers have in- sulated themselves from COVID-19 losses due to the aforementioned specific exclusionary language in property policies including limita- tions and specific exclusions for “virus,” “contagion” or “pandemic.” Since there is the onerous burden of linking the civil authority orders precluding occupancy of an insured job site or location to actual “direct property damage” questions arise including: Does the presence of a human virus constitute “direct physical damage to the insured property” or simply “property dam- age”? Does the inability to occupy an insured building, job site or location because of the presence of a virus constitute “property damage”? What about mandated cleaning requirements for sur- faces of shared equipment, walls, HVAC units, etc. where COVID-19 was found – are these costs a re- sult of “property damage”? Sadly, for policyholders, most courts have not forced carriers to accept these liberal coverage triggers. Savvy homebuilders should take action now to review their BR and property coverage, and consider Business Interruption and Extra Expense Coverage with their agent. But be warned, scams are out there, and the existence of le- gitimate, low-cost pandemic virus protection is virtually non-existent until the carriers can get more comfortable with COVID-19’s long- term economic and health effects.8 HOUSING IS THE SHINING LIGHT THAT CAN BOOST THE ECONOMIC RECOVERY POST-PANDEMIC, [training tomorrow’s workforce] NAHB reports that a healthy pace of rehiring, combined with weakness in the non-residential sector, reduced the open jobs rate to just 3.3% in June for the residential sector of the indus- try, with a total of 245,000 open jobs. The open job count was 325,000 a year ago. However, builders continue to cite limited access to skilled construction workers as a concern as they seek workers to undertake more home construction and remodeling. Labor prices continue to surge as supply con- tinues to catch up to demand—something that has proven consistent, even in the year of coronavirus. The White House American Workforce Policy Advisory Board is part of an executive order that President Trump signed in 2018 to develop a national strategy for training and retraining workers for high-demand industries, NAHB and the Home Builders Institute (HBI) pledged to train 50,000 workers over the next five years. The Board recently launched an ad campaign focused on “finding something new” and acquir- ing the skills needed for a new career. The campaign’s Find Something New website allows job seekers to find online learning opportunities, certificate programs, training pro- grams and apprenticeships. HBI is included as a partner in the “vocational, technical and trades education” section of the site to help prospective employees learn about the training opportunities available to enter the construction trades. NAHB’s promotional materials underscore hiring needs in six specific construction trades: carpentry, electrical, painting, masonry, HVACR and plumbing. But, says NAHB, it is vital to promote the vast diversity of well-paying career opportunities in the residential construction industry, ranging from engi- neering and architecture to design and marketing. N but only if the workforce is in place to do it.9 Building Savvy (214) 957-8077 Quartz & Natural Stone Countertops Serving the DFW area ajoyofgranite.com Appliances at all price ranges all the way to the highest-end brand names. Unique appliance outlet catering to homebuilders, remodelers and home-flippers Arlington Showroom 1500 I-20 East (at S. Collins) Arlington, TX 76018 817-299-2800 Hurst Showroom 840 Airport Freeway (at Precinct Line Rd) Hurst, TX 76054 817-299-2800 Forth Worth Showroom 4786 Hulen Park Dr. I-20 & S. Hulen Forth Worth, TX 76132 817-299-2800 Arlington Outlet Showroom 3401 W. Pioneer Parkway Arlington, TX 76013 817-299-2800 We are the largest independently-owned local appliance dealer in North Texas. From entry level to the highest end, you'll find it at North Texas' largest independently owned appliance dealer. 4 Tarrant Country locations (and worth the drive from surrounding areas) TEXASAPPLIANCE.COMNext >