Construction, modernization, major alteration and renovation, major A&R, insurance

10.6.3 Insurance Requirements

Builder's risk insurance is required at the time construction begins. The insurance must cover potential losses after initiation, but before completion, of the construction or modernization caused by theft, fire, vandalism, and other types of accidental loss or damage to the structure.

Immediately upon completion of construction, a nongovernmental recipient shall, at a minimum, provide the same type of insurance coverage as it maintains for other property it owns, consistent with the minimum coverage specified below. "Completion of construction" means either the point at which the builder turns a facility constructed with NIH grant support, or portion of a facility modernized or modified under a major A&R project, (that conforms to the design and specifications approved by the NIH and is available for occupancy) over to the recipient (i.e., the date of the final acceptance of the building or portion of a building) or the date of beneficial occupancy, whichever comes first.

If title to real property constructed, modernized, or altered under a major A&R project under an NIH grant vests (or will vest upon completion) in the recipient, the following minimum insurance coverage is required:

  • Title insurance policy that insures the fee interest in the real property for an amount not less than the full appraised value of the property. When the Federal participation covers only a portion of a building, title insurance should cover the total cost of the facility to prevent liens on the unsecured portion from having an adverse impact on the portion with a Federal interest. In those instances where the recipient already owns the land, such as a building being constructed in the middle of a campus setting, in lieu of a title insurance policy, the recipient may provide evidence satisfactory to the NIH awarding ICThe NIH organizational component responsible for a particular grant program or set of activities. The terms "NIH IC," or "awarding IC" are used throughout this document to designate a point of contact for advice and interpretation of grant requirements and to establish the focal point for requesting necessary prior approvals or changes in the terms and conditions of award., such as legal or title opinion, that it has good and merchantable title free of all mortgages or other foreclosable liens to all land, rights of way, and easements necessary for the project. In instances where a recipient is given land by the State, if the State recently acquired the land in a land swap transaction, the recipient should obtain title insurance. However, if the State has owned the land for a considerable period of time (i.e., 5 years or more), title insurance would not be necessary; a copy of the State documents giving the land to the recipient would be sufficient. If the recipient must buy the land on which to build, a legal opinion would not be sufficient; title insurance must be obtained in order to protect the Federal interest in the building to be constructed.
  • Physical destruction insurance policy that insures the full appraised value of the facility (whether owned or leased by the recipient) from risk of partial and total physical destruction. When the Federal participation covers only a portion of a building, the insurance should cover the total cost of the facility, because any damage to the building could make the building unusable and could thus affect the Federal interest. The insurance policy is to be maintained for the duration of the Federal interest in the property (see Real Property Management Standards-Use of Facility and Disposition in this chapter). The cost of insurance coverage after the period of grant support must be borne by a source other than the grant that provided the funds for the grant-supported project. The grant account will not remain active for this purpose.

Governmental recipients may follow their own insurance requirements. Federally owned property provided to a recipient for use need not be insured by the recipient.

The NIH awarding ICThe NIH organizational component responsible for a particular grant program or set of activities. The terms "NIH IC," or "awarding IC" are used throughout this document to designate a point of contact for advice and interpretation of grant requirements and to establish the focal point for requesting necessary prior approvals or changes in the terms and conditions of award. may waive one or both of the requirements above if the recipient shows that it is effectively self-insured against the risks involved. The term "effectively self-insured" means that the recipient has sufficient funds to pay for any damage to the facility, including total replacement if necessary, or to satisfy any liens placed against the facility. If the recipient claims self-insurance, the recipient must provide to NIH assurance that it has sufficient funds available to replace or repair the facility or to satisfy all liens. This assurance should state the source of the funds, such as the organization's endowment or other special funds set aside specifically for this purpose.