Orange County Construction Insurance for Master-Planned Communities and Former Base Land

In a master-planned community, the master developer grades and installs backbone infrastructure, then sells finished lots to merchant builders who build homes on their own schedules. The result is a long chain of parties working on adjoining phases for many years, and each phase closes into its own completed-operations period while the next phase is still under construction.

For builders, that makes the structure of the liability program a central decision. A project-specific policy for a defined tract can dedicate limits to that tract and keep completed-operations coverage in force for a set term. A practice policy shares its aggregate with every other job. Neither fits every project, but the decision should be made before the first home closes, not after the first defect letter arrives.

Master developers face a related question about soils and grading. If backbone grading later contributes to settlement claims on homes built by others, contract indemnity and the developer's own completed-operations coverage may both be tested.

EPA reports that the El Toro Marine Corps Air Station site covers approximately 4,712 acres in the City of Irvine. In January 2014, EPA deleted more than 1,900 acres from the Superfund list, with 1,200 of those acres held by Heritage Fields El Toro for about 9,500 homes plus commercial and retail space, and 700 acres going to the City for the Great Park. EPA also reported continuing work on the rest of the site, including a groundwater extraction and treatment system and monitoring of capped landfills, tied to volatile organic compounds such as trichloroethylene in groundwater.

For grading, underground utility and foundation contractors, that history matters even on deleted parcels. Excavation can encounter unexpected material, dewatering can intersect impacted groundwater and utility trenches can create pathways. A GL policy with a total pollution exclusion may not respond to those losses. Contractors pollution liability is designed for this exposure, but forms vary on known conditions, mold, disposal sites and transportation.

Developers should also expect lenders and buyers to ask about environmental conditions. A project-specific pollution policy can be one way to keep limits dedicated to a single community.

The City of Irvine describes the Great Park as approximately 1,300 acres, with more than 500 acres developed and over 300 acres in the first-phase planning and design stage. Park facilities built by the City are public works, so contractors bidding them should expect agency bid security, performance and payment bond requirements and the City's own insurance specifications in the bid documents.

A bond on public work protects the City and, for payment bonds, the subcontractors and suppliers who furnish labor and material. The contractor owes the surety indemnity if the surety pays. That is why a contractor's surety will want current financial statements and a work-in-progress schedule before supporting a large park package next to its residential work in the same corridor.

Under the OC Grading and Excavation Code (adopted January 27, 2015), Section 7-1-829 bars a grading permit until security is posted in the form and amount set in the County Grading Manual. One owner may post a blanket security for several concurrent or progressive projects, and the Building Official may require more security for finish grading before occupancy and energized utilities, or for stockpiles. On default, the County notifies the surety of the work and its estimated cost, then demands that cost.

The County bond form adds that permit changes or extensions do not release the surety. Because one failing phase can draw on a blanket bond, a surety will typically underwrite the whole program and its indemnitors, and terms vary by surety and individual risk.

Orange County projects still sit on top of statewide rules: contractor licensing, public-works bonding and subdivision improvement security under state law. What changes here is who administers them and where the ground has a history. A tract in the Ranch Plan answers to the County; a neighborhood near the Great Park sits beside an active federal cleanup.

A complete Orange County program for a builder or developer usually combines a builders risk policy for vertical construction, a GL structure matched to the phasing, CPL where earthwork or utilities touch the former base plus the bonds the County or City requires. To review a specific Orange County project, request a quote or call 844-978-7283.