Title
Purchase of Builder's Risk Insurance for Phoenix Sky Harbor International Airport Terminal 4 S-1 Concourse Construction Project (Ordinance S-45565)
Description
Request to authorize the City Manager, or his designee, to purchase builder's risk insurance covering the Phoenix Sky Harbor International Airport (Airport) Terminal 4 S-1 Concourse Project (Project). Payment will be made to the City's insurance broker, Marsh USA, in an amount not to exceed $400,000 for the builder's risk insurance premium. Further request authorization for the City Controller to disburse all funds related to this item.
The builder's risk insurance policy has a $50,000 per occurrence deductible, which will be applied if there is a physical damage loss to the Project. Authorization is further requested for the City Controller to disburse all funds necessary to pay any required insurance deductible reimbursement payment in an amount not to exceed $200,000.
Report
Summary
The estimated cost of builder's risk insurance purchased by the construction manager at risk (CMAR) is significantly more expensive and the cost would be passed on to the City through the Project. Allowing the City to purchase the insurance will save the City approximately $400,000.
If the City purchases the builder's risk insurance, the policy will include business interruption coverage, which will protect the City from an interruption of the Airport's revenue stream if a loss prevents operation of the terminal. The CMAR is unable to purchase business interruption coverage on behalf of the City.
Marsh USA has obtained quotes for comparison purposes related to the cost of builder's risk insurance, which includes the additional business interruption coverage. The Finance Risk Management Division has reviewed the quotes and evaluated the coverage, limits, and premium prices.
Financial Impact
Funds to purchase the builder's risk insurance and to pay any required insurance deductible reimbursement are available in the Aviation Capital Improvement Program budget.
Location
Sky Harbor International Airport, 3400 E. Sky Harbor Blvd.
Council District: 8
Department
Responsible Department
This item is submitted by Assistant City Manager Deanna Jonovich and the Aviation and Finance departments.