Client Alert – Guidance for Construction Companies and Contractors in Light of COVID-19
On Saturday March 21, 2020, Governor Murphy issued Executive Order No. 107, which requires as many state residents as possible to work from and to stay at home to contain the spread of the COVID-19 virus. To the extent that construction contractors cannot perform their functions via telework or work-from-home arrangements, paragraph 11 of the Governor’s Order allows for work to continue at job sites but directs construction contractors “to reduce staff on site to the minimal number necessary to ensure that essential operations can continue.”
COVID-19 and the unprecedented actions taken by authorities to contain its spread will pose great challenges to contractors. Some measures that contractors can take to mitigate any financial losses include:
- Review your contracts to determine if they permit adjustments to schedule milestone dates or delivery schedules due to causes beyond your control. While construction contracts do not typically entitle contractors to additional compensation, force majeure type clauses which excuse performance are common.
- If specialty materials required by project specifications are not available in light of COVID-19 shutdowns, submit a request for a time extension. To mitigate any potential schedule impact, inquire about obtaining approval for a material substitution.
- If your business is interrupted, review your insurance policies for potential coverage. Time matters, and your policy may have a deadline for reporting claims. Standard property insurance policies usually include two types of coverage for disruptions like COVID-19: (1) business interruption coverage typically insures against losses when the policyholder’s operations are directly affected, and (2) contingent business interruption coverage insures against indirect losses such as when suppliers or customers are affected. Keep track of your costs as documentation will be required to substantiate any business losses.