Installation Floater Insurance: Testing and Commissioning for Industrial Upgrades

Includes Testing/Commissioning and DSU (Delay in Start-Up)

Contract-ready COI/endorsement checklist: - Additional Insured (AI) - Primary & Non-Contributory (PNC) - Loss Payee (as applicable) - Waiver of Subrogation - Testing/Commissioning endorsement noted - DSU (Delay in Start-Up) if required

Last updated: 2025

Looking for broader project coverage? See our Builder’s Risk overview and the Installation Floater FAQ on that page: https://www.summitcover.ca/business-insurance/builders-risk

Installation Floater & Testing/Commissioning for Industrial Upgrades

Introduction

This guide explains how installation floater insurance differs from builder’s risk coverage during industrial upgrades, when each is appropriate, critical triggers (like testing/commissioning endorsements and delayed startup), and how to demonstrate proof of insurance to lenders and owners. For foundational context, see the Builder’s Risk Insurance overview.

Installation Floater vs Builder’s Risk

Builder’s Risk Insurance covers new construction and major renovations to buildings/structures (foundations, envelope, structural upgrades). It is typically purchased by the property owner or general contractor.

Installation Floater Insurance specifically insures the value of equipment, materials, or components being installed that are not part of the original structure, such as HVAC, machinery retrofits, or control systems. It is typically carried by the contractor or sub-trade doing the installation.

The Role of Testing/Commissioning Endorsements

Many industrial upgrades require testing or commissioning phases to verify system integrity and performance. However, many insurance policies cease coverage upon connection to utilities or triggering operational testing.

• Testing/Commissioning Endorsements extend installation floater coverage to accidental loss or damage occurring during startup, system pressurizing, load testing, or other functional operational tests prior to handover.

• Without these endorsements, a policy may exclude incidents that occur during pre-acceptance trials, leaving contractors and project owners exposed.

Common Endorsements/Extensions:

• Testing and Commissioning: Extends coverage to system/operational testing losses.

• Expediting Expenses: Covers extra costs to expedite repairs/replacement after a covered loss during testing.

• Consequential Losses/DSU: See below.

Soft Costs & Delay in Start-Up (DSU)

Many lenders and project owners require coverage for “soft costs” and “delayed start-up” (DSU) exposures:

• Soft Costs: Indirect project expenses resulting from an insured loss (design fees, permits, financing costs, legal, increased construction loan interest).

• DSU (Delay in Start-Up): Covers loss of anticipated profits or increased costs due to inability to begin operations on schedule after an insured event during construction or installation.

• DSU Triggers: Insured event (e.g., fire, theft, flood) causes a loss during installation or testing/commissioning, delaying the start of operations or occupancy and resulting in measurable lost revenue or extra expense.

Key Points for Owners/Lenders

• DSU requires careful claims documentation (project schedule, anticipated revenues, extra costs incurred).

• Insured party must demonstrate direct causation between property loss and project delay.

Sample Evidence: Certificate of Insurance

Owners, lenders, or project finance partners may require proof of specific insurance coverages:

• Certificate of Insurance with:

• Named project, address, value

• Insurance limits for installation floater or builder’s risk

• Testing/commissioning and DSU endorsements indicated

• Lender/owner listed as additional insured or loss payee

• Insurer contact details

When to Use Each Coverage

• Use builder’s risk when insuring the construction of a new structure, a major addition, or structural changes where responsibility is with the owner or GC.

• Use an installation floater for equipment installations or upgrades (e.g., replacing boilers, generators, industrial control panels) conducted under a subcontract or supply contract.

• If a project involves both structural changes and major equipment installation, both coverages may be coordinated, ensuring contract clarity and no gaps at the interface.

Related Resources & Further Reading

• Builder’s Risk Insurance overview

• Commercial Property Insurance

For tailored advice regarding policy structuring for your industrial project, speak to Summit’s risk experts for comprehensive solutions.