1. Page 1 Recording of this session via any media type is strictly prohibited.

2. Page 2 Recording of this session via any media type is strictly prohibited.

3. Page 3 Recording of this session via any media type is strictly prohibited. DISCLAIMER The analyses and opinions in this presentation are based on terms and conditions of certain insurance policies used for illustrative purposes only. Each policy may contain different language and provisions. As a result, nothing herein should be relied on to apply to any given scenario not specifically addressed. Nor should the contents of this presentation be deemed to constitute legal advice.

4. Page 4 Recording of this session via any media type is strictly prohibited. Builders Risk Coverage is an extremely complex coverage and our presentation is intended to be a general overview and does not cover every possible scenario or issue that may be encountered by the Risk Manager.

5. Page 5 Recording of this session via any media type is strictly prohibited.  A greater understanding of Builders Risk coverage, including common pitfalls to avoid  Confidence your Builders Risk program will be better targeted to fully indemnify the insured for damages after an insured event  In the event of damage, knowledge of how best to navigate a very complex claim process

6. Page 6 Recording of this session via any media type is strictly prohibited.  To indemnify for damage to a project in the course of construction  To insure against financial / economic losses arising in the course of construction

7. Page 7 Recording of this session via any media type is strictly prohibited.  Project Owner / Developer  General Contractor  Sub-Contractors

8. Page 8 Recording of this session via any media type is strictly prohibited.  Does it correspond to the interests of the parties and the exposure?  Is the policy consistent with the construction contract?  Are there sub-limits, exclusions or other limitations which are inconsistent with the exposure?

9. Page 9 Recording of this session via any media type is strictly prohibited.  Pre-Existing Structures at the Site  Project Duration  Type of Structure Under Construction  Any Other Entities with Interests in the Property

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11. Page 11 Recording of this session via any media type is strictly prohibited.  Machinery & Equipment  Underground Works  Sheeting & Shoring  Excavation Work  Landscaping  Off-Site Storage of Materials

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13. Page 13 Recording of this session via any media type is strictly prohibited. The type of property covered under a Builders Risk Policy can vary significantly from policy to policy

14. Page 14 Recording of this session via any media type is strictly prohibited. We will cover the building(s) or structure(s) described in the Declarations while in the course of construction, reconstruction or renovation provided a Limit of Insurance is shown in the Declarations. Covered property includes: a. Property of every kind and description that you own or are liable for that is intended to become a permanent part of the building or structure described in the Declarations. This includes building excavations. b. If not covered by other insurance, temporary structures on site, including cribbing, scaffolding and construction forms. c. Property in transit that is intended to become a permanent part of the building or structure described in the Declarations, providing a separate Limit of Insurance is shown for such coverage in the Declarations.

15. Page 15 Recording of this session via any media type is strictly prohibited.  Existing Structures  Machinery, Tools or Contractors’ Equipment Not Intended to Become a Permanent Part of the Building or Structure  Scaffolding, Fences  Temporary Structures, Office Trailers

16. Page 16 Recording of this session via any media type is strictly prohibited.  Can contractor’s equipment be insured under the Builders Risk policy?  If so, how?  Endorsement  Reporting Values

17. Page 17 Recording of this session via any media type is strictly prohibited.  Does it become a permanent part of the structure?  Does it need to be specifically reported?  Is there a limitation for the value in the policy?

18. Page 18 Recording of this session via any media type is strictly prohibited. Is this wall temporary?

19. Page 19 Recording of this session via any media type is strictly prohibited.  Underground Works  Sidewalks & Paving  Maps, Plans, Blueprints  Trees, Shrubs & Plants  Overhead & Profit Percentage  Property of Others

20. Page 20 Recording of this session via any media type is strictly prohibited.  When Construction is “Complete”  Punch List  Warranty Work  Partial Sales / Owner Occupancy  Expiration of the Policy

21. Page 21 Recording of this session via any media type is strictly prohibited.  Certificate of Occupancy  Acceptance of Project by Owner  Unless Amended or Endorsed With “Permission To Occupy”

22. Page 22 Recording of this session via any media type is strictly prohibited.

23. Page 23 Recording of this session via any media type is strictly prohibited.

24. Page 24 Recording of this session via any media type is strictly prohibited. 2. Permission is granted to occupy the covered building(s) or structure(s) for its intended purpose(s) during the course of construction except as indicated below:

25. Page 25 Recording of this session via any media type is strictly prohibited.  Fire  Collapse  Water Damage  Wind  Flood  Earthquake

26. Page 26 Recording of this session via any media type is strictly prohibited.

27. 27 INSURING AGREEMENT : This Policy, subject to the terms, exclusions, limitations and conditions contained herein or endorsed hereto, insures against all risks of direct physical loss of or damage to property insured while at the location of the INSURED PROJECT*, while in offsite storage or while in transit, all within the Policy territory and occurring during the term of this Policy. INSURING AGREEMENT : This Policy, subject to the terms, exclusions, limitations and conditions contained herein or endorsed hereto, insures against all risks of direct physical loss of or damage to property insured while at the location of the INSURED PROJECT*, while in offsite storage or while in transit, all within the Policy territory and occurring during the term of this Policy.

28. Page 28 Recording of this session via any media type is strictly prohibited. PERILS EXCLUDED PERILS EXCLUDED

29. Page 29 Recording of this session via any media type is strictly prohibited. One of the most frequently cited exclusions is the Defective Design & Workmanship Exclusion

30. Page 30 Recording of this session via any media type is strictly prohibited. Defective Design & Workmanship Exclusion g.Defective, deficient or flawed workmanship or materials, or for expenses to redesign or revise flawed or defective plans or architectural designs. But we will pay for “loss” to other Covered Property that results from such defective workmanship, materials or design provided such loss or damage is not otherwise excluded in this policy.

31. Page 31 Recording of this session via any media type is strictly prohibited. Cost of making good faulty or defective workmanship or material, unless direct physical loss or damage by an insured peril ensues and then this policy will cover for such ensuing loss or damage only;

34. Page 34 Recording of this session via any media type is strictly prohibited. The courts have been inconsistent in drawing the line on ensuing losses

35. Page 35 Recording of this session via any media type is strictly prohibited. *Dictionary.com

36. Page 36 Recording of this session via any media type is strictly prohibited.  Hard Costs / Contract Works  Soft Costs / Income Loss

37. 2. PROPERTY INSURED: A. Permanent Works – All materials supplies, equipment, machinery, and other property of a similar nature being property of the insured or of others for which the Insured may be contractually responsible the value of which has been included in the estimated TOTAL CONTRACT VALUE* of the INSURED PROJECT* declared by the Named Insured, all when used or to be used in or incidental to the demolition of existing structures, site preparation, fabrication or assembly, installation or erection, alternation, renovation or construction of the INSURED PROJECT*. B. Temporary works – All scaffolding, form work, fences, shoring, hoarding, falsework and temporary buildings all incidental to the project, the value of which has been included in the estimated TOTAL CONTRACT VALUE* of the INSURED PROJECT* declared by the Named Insured.

38. Page 38 Recording of this session via any media type is strictly prohibited. C. EXPEDITING EXPENSE Subject to the sublimit entered in 6B(5) of the Declarations, this policy shall pay reasonable wages for overtime, night work, and work on public holidays and costs of express freight or other rapid means of transportation which are necessary to make temporary repairs, to expedite the permanent repair, or to replace the property insured when damaged by an peril insured, but only to the extent such is necessary to continue as nearly as practicable the normal operation of the work in progress.

39. Page 39 Recording of this session via any media type is strictly prohibited. 39

40. Page 40 Recording of this session via any media type is strictly prohibited.  What is it?  How is it measured within the context of a builders risk exposure?

41. Page 41 Recording of this session via any media type is strictly prohibited.  State of Completion / Installed Costs  Increased Costs to Complete the Project  Material Price Escalation  Availability of Labor  Re-sequencing of Contractors  Extended General Conditions  Seasonal Issues

42. Page 42 Recording of this session via any media type is strictly prohibited.  Code Compliance  Overhead & Profit  Expediting Expense  Zurich American Insurance Company v. Keating Building Corporation 513 F. Supp. 2d 55NJ

43. Page 43 Recording of this session via any media type is strictly prohibited.  Oceanside Pier View LP v Travelers Property Casualty Co. of America  2008 Decision – Conflicts with Keating  Following Keating, AAIS (American Association of Insurance Services), Revised the BR Coverage Forms  New Exclusion: “Delay in Completion & Increased Insurance Construction Costs” was Added, Precluding Coverage for Increased Construction Costs Due to Delay

44. EXCLUSION –INCREASED CONSTRUCTION COSTS d. Delay in Completion And Increased Construction Costs- 1)“We” do not pay for loss or damage caused directly or indirectly by a: a) delay in the completion of construction, erection, or fabrication of a “building or structure” or any portion of a “building or structure”; or b) a change in the sequence of construction, erection, or fabrication of a “building or structure” or any portion of a “building or structure” regardless of the cause of the delay in completion or change in sequence.

45. Page 45 Recording of this session via any media type is strictly prohibited.  Frequent Changes & Upgrades to Municipal & State Codes  Renovation / Restoration of Existing Building(s)  Post-Loss Code Compliance  Fire Protection & Life Safety  Loss to Damaged & to Undamaged Property

47. Page 47 Recording of this session via any media type is strictly prohibited. 47

49. Page 49 Recording of this session via any media type is strictly prohibited.  Overtime Labor – Weekends & Holidays  Slotting Charges for Material Purchases  Express Freight & Transportation

50. Page 50 Recording of this session via any media type is strictly prohibited.  General Conditions  Temporary Heat & Utilities  Temporary Structures & Enclosures  Equipment Rental  Expediting Costs Coverage  Policies Typically are Written with Nominal Sub-Limits

51. Page 51 Recording of this session via any media type is strictly prohibited. To Provide Coverage For Additional Costs Incurred as a Result of a Delay in the Completion of a Project Due to a Covered Cause of Loss

52. Page 52 Recording of this session via any media type is strictly prohibited.  Original Project Schedule  Revised Schedule / Change Orders  Non Loss Related Factors

53. Page 53 Recording of this session via any media type is strictly prohibited. DELAY*: the period of time between the ANTICIPATED DATE OF COMPLETION* and the actual date on which commercial operations or use and occupancy can commence with the exercise of due diligence and dispatch.

54. Page 54 Recording of this session via any media type is strictly prohibited.  Soft Costs  Expenditures resulting from the delay that would not otherwise have been incurred  Gross Earnings  Lost income from a delay in start up of operations  Rental Value  Lost income associated with a delay in tenant occupancy  Extra Expense

55. Page 55 Recording of this session via any media type is strictly prohibited. Typical Exposures to be Considered:  Real Estate Taxes  Interest  Consulting Fees  Legal & Accounting  Equipment Rental  Overhead / Extended General Conditions  Often Claimed as a Hard Cost  General Contractor vs. Developer

56. Page 56 Recording of this session via any media type is strictly prohibited.  Insurance  Refinance Charges  Architectural & Engineering  Historic Tax Credits  Direct Costs – Non-Operational  Developer Overhead / Extended General Conditions  Leasing Fees / Re-Negotiation

57. Page 57 Recording of this session via any media type is strictly prohibited.  Refinance Charges  Letter of Credit  Remarketing of Bonds  Advertising & Promotional  Holdover Indemnity  Others as Accepted by the Company

58. Page 58 Recording of this session via any media type is strictly prohibited. ALL POLICIES ARE NOT CREATED EQUAL ALL POLICIES ARE NOT CREATED EQUAL

59. Soft Costs Coverage Comparison POLICY 1 A. Interest on money borrowed to finance construction or repair; B. Real estate and property taxes; C. Architect, engineering and consultant fees; D. Legal and accounting fees; E. Advertising and promotional expenses; and F. Rental or lease of construction equipment POLICY 2 Interest upon money borrowed to finance the contract work Other as accepted by the Company POLICY 3 1. Extra construction costs incurred to continue construction ad meet contract dates; 2. Construction loan interest on money borrowed to finance construction or repair; 3. Realty taxes and other assessments on the construction site accruing during the period of delay; 4. Architect, engineering and consultant fees; 5. Legal and accounting fees; 6. Insurance premiums; 7. License and permit fees; 8. Title fees; 9. Additional general overhead; 10. Additional debt service payment; 11. Additional bond interest; 12. Additional refinancing charges; 13. Additional construction loan fees

61. Page 61 Recording of this session via any media type is strictly prohibited.  Business Income Covers Only Those Earnings That Would Have Been Generated Had the Loss Not Occurred  Soft / Delay Costs Provides for the Additional Cost Irrespective of Anticipated Earnings

62. 62 PIC FIRE (RAMZ)

63. Page 63 Recording of this session via any media type is strictly prohibited.  Rental income, meaning the:  Net rental income (net profit or loss before taxes) that would have been earned or incurred; and  Continuing normal expenses incurred in your rental operations  Ramp-Up vs. Stabilization in the Calculation of the Loss

64. Page 64 Recording of this session via any media type is strictly prohibited. With respect to alterations, additions, and property while in the course of construction, erection, installation, or assembly, due consideration shall be given to the available rental experience of the business after completion of the construction, erection, installation or assembly.

65. LOSS OF RENTS Stabilized Occupancy STABLIZED Anticipated Completion Date JANUARY 1 Actual Completion Date APRIL 1

66. Page 66 Recording of this session via any media type is strictly prohibited.  Acceleration Costs  Slotting Charges  Other Construction Costs

67. Page 67 Recording of this session via any media type is strictly prohibited. Expenses to Reduce Loss We will pay all expenses you incur that actually reduce the “loss.” But we will not pay more than the amount by which the “loss” is actually reduced. Expenses to Reduce Loss We will pay all expenses you incur that actually reduce the “loss.” But we will not pay more than the amount by which the “loss” is actually reduced.

68. Page 68 Recording of this session via any media type is strictly prohibited.  Factors Affecting Claim Evaluation & Preparation  Subrogation Waivers

69. Page 69 Recording of this session via any media type is strictly prohibited.  Architectural/Engineering Services & Consulting Fees  Legal & Accounting Fees  Advisory /Consulting Services To Assist the Insured with Loss Related Activities From Emergency Services and Stabilization/Resumption of Operations  Relates to Services In Connection With the Evaluation of the Loss & Preparation of the Necessary Claims and Supporting Documentation  Additional Legal & Accounting as a Result of the Claim (i.e. New Lease)

70. Page 70 Recording of this session via any media type is strictly prohibited. Questions? Steve Truono Steve.Truono@starwoodhotels.com Harvey Goodman HGoodman@gggco.com