The Smartest Tool in the Shed
Man of Steel: Billionaire Sets out to Revive Whyalla
Prevention Key in Reducing Spinal Injuries
Construction Tech Trends for 2019 and Beyond
Trendsetters and Construction Stars at the Master Builders Australia National Awards
Ancient Profession Moves into the Future
Don't Let Scope Creep Sneak Up On You
What's it Worth to be a Tradie?
By Duane Craig
July 3, 2016
The old saying goes, “insurance covers everything except what happens.” It’s a tongue-in-cheek way to express the frustration policyholders often feel when they find out insurance won’t cover their recent loss. However, in many instances the policyholder doesn’t make an accurate assessment of risks. This leads to some risks not getting covered at the expense of others. On the bright side, forecasters say that contractors with good loss profiles should easily find affordable policies in 2016 because competition is strong among insurers.
There are a few trouble spots though with insurers reporting some lines as challenging. Topping the list of risks with rising claims is the automobile line for contractors. Distracted driving, higher medical care costs for treatment, and auto repair costs are the main pain points for insurers. The fire risk for wood frame construction is another issue for insurers, as is the increased litigation related to defect claims.
Over the past few years courtroom decisions have added uncertainty to coverages provided by commercial general liability policies. Because all stakeholders on a project are usually named in lawsuits over defects, an increasingly contradictory legal landscape across jurisdictions is making it difficult for policyholders to assess their risks.
The primary issue boils down to the meaning of a single word: occurrence. The term, occurrence, as used in general liability policies is an ambiguous term leading to different interpretations by courts in various jurisdictions. General liability policies were written to fit in many different industries, but certain parts of them don’t fit well within construction.
When a loss occurs, there must be property damage that comes from an “occurrence” as defined in the policy. But, various courts are interpreting the definition of the word “occurrence” differently when it comes to construction defects.
To deal with the issues, some construction companies are seeking out insurers offering endorsements that provide coverage for the defect under the laws of the state most favorable for the policyholder. Since the endorsement doesn’t depend on a specific jurisdiction, it offers construction companies some consistency in coverage for construction defects. One problem, however, is that pricing is inconsistent. It is often linked to the relationship the insurer has with the policyholder, the policyholder’s company size, and whether or not the policyholder takes retention. State legislatures are now getting into the act and are passing legislation to take the issue out of the courts’ hands.
Building with modular units is on the rise because of its potential to reduce variables, increase construction speed, and lower-cost. However, the advantages don’t come without risk.
According to Zürich Insider, hidden gaps where modular components go together can invite water intrusion, which yields high losses. Water damage is also possible when modular units are connected to dissimilar materials, or their surrounding materials weather at different rates. Delays can ultimately mount when modular components must be removed because of defects. Contractors who lack experience with modular construction will also face increased risks.
There is also the possibility of hidden damage that poses additional risk. Since components usually arrive completely assembled, quality issues inside the walls, floors, and ceilings might not be apparent until after installation.
Emerging technologies that are coming into play on construction sites bring along their fair share of insurance coverage issues. Drones pose risks from their use and misuse. Operator error can send the unit on a collision course with property or people, and flights over private property can lead to liability and privacy challenges from nearby property owners. Autonomous machines pose the possibility of malfunctioning and damaging property, or worse, people.
More than ever, contractors today need to have a good understanding of what risks they can insure and what risks they can’t. Contractors can also consider matching their insurance coverage to the project delivery method. For example, integrated project delivery and design build make it difficult to assign risks according to stakeholders. This makes it more necessary for contractors to ensure they’re covered in the gray areas.
The best situation for a contractor is to avoid loss and mitigate risk. When risk is well-managed, you can get better terms and conditions from insurers. It’s always much better to rely on prevention than insurance settlements.
The Anatomy of a Request for Information (RFI)
If only there was a go-to template or formula you could follow in order to guarantee success in the bidding process. Long story short, there is no one right answer or solution. However, that doesn’... Read More
Construction work as we well know is a team effort, requiring the synchronization of workers, equipment and materials. And just as construction wo... Read More
Listen in to this free webinar with Carey Larsen, Social Marketing Manager at Procore, Bob Gardner, CEO of Gardner Builders, and Jessica Stoe, Bran... Read More
At a rural Ohio job site, Wieland Construction and its subcontractors are managing progress entirely from mobile devices — an investment they say h... Read More
The majority of project leaders and teams on site today still utilize outdated, manual tools and processes—even though there are plenty of technolo... Read More
Keeping workers safe on road construction sites is an ongoing problem, underlined by the fact that the number of fatalities at these sites increase... Read More
Automation has improved by leaps and bounds over the last decade, and the technology is proving viable as more companies start to incorporate some ... Read More