In the realm of construction projects, ensuring the timely completion of projects is crucial for both project owners and lenders, who are primarily interested in the future income streams these projects promise. However, unforeseen damage to contract works can significantly delay project completion, impacting these income streams. This article delves into the importance and functionality of Delay in Start-Up (DSU) insurance, a vital tool for mitigating such financial risks.
What is Delay in Start-Up Insurance?
Delay in Start-Up (DSU) Insurance, also known as Advanced Loss of Profits (ALOP) Insurance, is a type of cover designed to protect businesses against financial losses resulting from delays in the completion of construction or infrastructure projects, caused by an insured peril under the Contract Works policy.
The insurance typically covers the loss of anticipated revenue or profits that the business would have earned had the project been completed as scheduled. It can also cover additional expenses incurred to mitigate the delay, such as increased interest payments or additional costs to expedite the project.
Cover is arranged as an extension of the Contract Works cover, and cannot be purchased separately, or arranged after the Contract Works policy has been placed.
“We often speak to clients when they have experienced a delay in construction projects. DSU insurance is not just a safety net; it’s a strategic component of risk management that allows project stakeholders to safeguard their financial interests and maintain confidence in project timelines.” Tracy Keep, National Construction Practice Group Leader
What Constitutes a DSU Claim?
A Delay in Start-Up (DSU) claim arises when a project experiences a delay in its completion due to covered events, leading to financial losses. To constitute a DSU claim, the following elements are typically involved:
Covered Delay: The delay must be caused by an event covered under the DSU extension by a peril which is covered under the Contract Works section of the policy.
Impact on Completion: The delay must directly affect the project’s scheduled completion date, preventing it from becoming operational as planned.
Financial Loss: The delay must result in a quantifiable financial loss, such as lost revenue or profits that the project would have generated if completed on time.
Documentation: The claim must be supported by thorough documentation, including evidence of the delay, its cause, and the financial impact. This may include project schedules, financial statements, and other relevant records.
Mitigation Efforts: The policyholder may need to demonstrate efforts to mitigate the delay and minimise losses, such as expediting work or implementing alternative solutions.
How Gallagher can help
Gallaghers team of experienced construction insurance specialists are available to discuss the best type of cover to suit your needs. Contact us today if you would like more information.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/ or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
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