Builders Risk Case Update: BCC Partners, LLC v. Travelers

Background of the Case

BCC Partners, LLC, contracted with Ben F. Blanton Construction, Inc. ("Blanton"), to build a seven-building apartment complex (the "Project") in Creve Coeur, Missouri, for a price of $24,461,157. Blanton was contractually required to secure and maintain a builders risk policy on the project and secured a policy from Travelers Property Casualty Company of America.

Blanton was the sole named insured listed in the policy declarations. Other persons or organizations qualified as being an additional named insureds if Blanton agreed in a written contract, executed before a loss, to name such persons or organizations as additional named insureds, but only to the extent of their financial interest in the "covered property."

In late December 2015, because of significant rainfall at the Project location, a retaining wall failed. Blanton submitted a claim for physical damage, and Travelers paid $1,317,080 after application of a $50,000 deductible. Blanton filed suit against Travelers, alleging that the costs associated with removing and replacing the wall were not paid in full.

Litigation resulted, and a jury awarded an additional $331,868. Blanton filed for bankruptcy in July 2020.

BCC submitted a claim for loss of income and soft costs on June 29, 2016. Travelers issued an advance payment of $200,000 on December 15, 2016. On March 21, 2019, Travelers denied any additional payment to BCC and indicated the previous $200,000 advance may represent an overpayment, which it reserved the right to fully recover. Ultimately, BCC demanded the remaining policy limits for soft costs ($100,000) and rental value $1.3 million (a $1.5 million limit less the $200,000 advance payment). Travelers again declined any further payment.

Travelers contended that BCC was not covered for rental value and soft costs because BCC was not an insured under the Special Time Element Coverage Form or Soft Costs Coverage Extension. BCC was an additional named insured only for its financial interest in "covered property," and then only if Blanton agreed in a written contract or agreement, executed prior to loss, to name BCC as an additional named insured.

The coverage for rental value is limited to loss of rental value that "you" sustain. Similarly, the coverage for soft costs is limited to "your" soft costs. The policy defines "you" and "your" as only the named insured shown in the policy declarations, and the only named insured listed in the declarations was Blanton.

BCC filed suit in August 2022, alleging Travelers' breach of the insurance policy and vexatious refusal to pay the claim. The district court granted summary judgment to the insurer on both claims; BCC appealed.

Court's Findings and Reasoning

The Eighth Circuit Court of Appeals affirmed the findings of the US District Court. Its findings included the following.

• BCC was not covered for its alleged losses of rental income and soft costs. Under the Travelers' policy, only a named insured was covered for such losses, and Blanton was the only named insured. BCC was designated as an additional named insured, and the scope of coverage for an additional named insured did not include rental income and soft costs.
• The Travelers' policy was not ambiguous. The court found that the plain language of the policy was not ambiguous. The Travelers' policy limited coverage to additional named insureds to only their financial interest in "covered property."
• Even though a premium of $5,317 was paid for $1.5 million of coverage for lost rental value and soft costs, this did not change the fact that BCC was not an insured for such coverage. The Eighth Circuit acknowledged the possibility that BCC, and perhaps Travelers, anticipated that BCC would be insured for loss of rental value and soft costs. However, Missouri law requires that the Travelers' policy be enforced when the language is clear and unambiguous.

Analysis of the Case

In my opinion, the Travelers' builders risk insurance policy was inherently flawed, for several reasons.

First, when a Travelers' builders risk policy with this same policy form is issued to a contractor, the contractor is the named insured, and the project owner should anticipate additional named insured status (assuming the contractor contractually agrees to name the project owner as an additional named insured). This means the owner will not be insured for loss of revenue or soft costs. This is completely the opposite of the approach taken by other builders risk insurers and project stakeholders.

When considering loss of revenue and soft costs loss exposures, it is principally the project owner (and its lenders) that need/require these coverages. A contractor does not have "business income," "rental value," or "soft costs" exposures like a project owner has. It will not sustain a loss of revenue or rents due to a project delay or many of the types of soft costs (as defined in a builders risk insurance policy).

Second, when issued to a contractor, the Travelers' builders risk policy puts both the contractor and project owner at greater risk of breaching construction contract insurance requirements. The contract documents may include specific builders risk insurance requirements for loss of income and/or soft costs. If these requirements are not fulfilled by the builders risk policy, one of the parties is needlessly in breach of their contractual obligations.

Third, if an owner is to be insured by this Travelers' builders risk policy form, it should require that it be the named insured listed in the policy declarations. For the reasons mentioned in this article, it should avoid being an additional named insured, particularly if it requires "business income," "rental value," and/or "soft costs" coverages.

And finally, this case is not an isolated incident. As part of its arguments in the underlying case, Travelers relied on Downtown Lofts LIHTC LLLP, et al. v. Travelers Prop. Cas. Co. of Am., Civil Action No. 19-CV-3295-WJM-SKC (D. Colo. Dec. 31, 2020), which is very similar to the facts and issues of BCC Partners, LLC v. Travelers Prop. Cas. Co. of Am., No. 24-1909 (8th Cir. 2025).

In that case, the Travelers' builders risk policy was secured and maintained by the general contractor, FCI Constructors, Inc. A covered loss resulted in water damage to the insured project. FCI presented a claim for physical damage in the amount of $3,079,519 and its soft costs of $238,897, which Travelers paid. Downtown Lofts was the project owner and also presented a soft costs claim for $657,211. Travelers denied coverage for the same reasons here—the project owner was not the named insured under the $1 million limits of the Soft Costs Coverage Extension.

Takeaway

If a project owner is to be insured by a Travelers' builders risk policy, which includes Construction PAK-Builders Risk Coverage Form (CM T2 21 04 13) and Construction PAK- Builders Risk Special Time Element Coverage Form (CM T2 23 04 13), the owner should require it be the named insured listed in the policy declarations. The owner should avoid being an additional named insured, particularly if it has secured loss of revenue or soft costs coverages.