When the unthinkable happens on a long-term construction project, insurance covers the repair of the building, but the contractor incurs the "soft cost" damages, such as construction loan interest, property taxes, and marketing collateral.  A contractor's insurance policy often covers the soft costs associated with the incident, but contractors should be careful not to miss out on recovering these funds because of mistakes made when submitting a construction claim. Avoid these common mistakes to minimize your risk:

 Failure to Record the Damage and Recovery Efforts

Document all elements of the loss in photos, video, and writing immediately after the incident.

 Failure to Assign the Task of Documentation

The documentation duty should be undertaken by someone who is knowledgeable, thorough, and able to follow through until the final insurance payment is made, which could take months depending on the size of the claim.

Failure to Provide High-Quality Graphics

For example, a graphic which should be included in a claim would be a color-coded rendering showing the extent and a cause of damage. The graphic provides a powerful visual tool that helps the adjuster, who may not be a construction expert, to analyze the damage.

Failure to Document All Verbal Conversations with the Adjuster

Verbal meetings between a contractor and insurance adjuster can be helpful, but immediately after they occur, the contractor should recap the meeting in an email or letter to document agreements and the next course of action.

Failure to Provide Sufficient Supporting Documentation

All insurance claims require supporting "source documentation."  Make sure you provide copies of the original loan agreements, copies of bank statements showing all payment transactions, etc.

Failure to Hire a Forensic Accountant Early in the Process

If a loss happens on the project, a forensic accountant can identify the appropriate documentation and any other actions necessary to submit a compelling claim to the insurance company on behalf of the contractor.