A Hefty Price-Tag
Construction businesses pay a lot for insurance…perhaps more than any other industry.
For all the coverage lines a contractor might procure (GL, Workers Comp, Commercial Auto, Umbrella, etc.), many firms go a full year without a claim.
What does a claim look like?
But even the best, most safety-conscious contractors are vulnerable to a claim. In a litigious society, a seven-figure lawsuit can happen with one unfortunate-incident.
Below are claims examples for the various risk-exposures facing contractors.
|Builders Risk||Over the course of several months, a homebuilder was working with his team on a house. One night his equipment and building material was stolen.|
|Auto Liability||An artisan contractor didn’t completely tie-down the equipment in his trailer. As he’s driving down a bumpy road, several pieces of equipment fall out, break, and damage another vehicle.|
|GL – Premises Liability||A worker at a construction site gets his truck muddy. As he’s hosing it down, he receives a phone call and sets the hose down for a moment. A teenager rides his bicycle over the hose, skids on to the wet/muddy area, is thrown from the bike, and suffers a serious head injury.|
|GL – Completed Operations Liability||A general contractor on a roadwork project hires a subcontractor to install the guardrails. On that highway a few years later, a driver is injured due to the faulty guardrail. The general contractor has transferred risk through ‘additional insured’ and ‘waiver of subrogation’ contract verbiage to the subcontractor. Thus, the guardrail installer is held responsible for the claim when the investigation finds that the sub’s faulty ‘completed operations’ caused the bodily injury.|
|Pollution Liability||A general contractor was responsible for overseeing the renovation of a hospital wing. A patient died in the intensive care unit adjacent to the construction zone, and the patient’s cause of death was traced back to dust generated during demolition activities. The contractor was sued for negligent containment of the construction zone.|
|Professional Liability||A design-build contractor designs the lighting fixtures for a large, upscale hotel. After completion, it becomes evident that the fixtures, which were produced overseas, do not meet UL standards. All fixtures must be replaced.|
|Workers Comp||Overexertion is the most common Workers Comp claim according to a study from the Department of Labor. This injury occurs when a muscle is pulled, a ligament sprained, or a joint moves beyond its typical range of motion. A construction worker, at the end of a long day, uses tired muscles and poor posture to lift a heavy item, suffering an on-the-job lower back injury.|
Above details several coverage lines for contractors, but this is by no means an all-encompassing list.
There are ‘wrap-up’ programs (OCIP, CCIP, ROCIP) that provide comprehensive coverage for large projects.
There are exotic coverages like ‘subcontractor default insurance’…which is not often utilized, but can be very effective in the right situation.
And there’s bonding…which is another world of insurance and has many varieties (surety bonds, bid bonds, performance bonds, etc)
Don’t Go It Alone
Shrewd business owners / managers like to pick/choose vendors that cut costs (ie – Amazon).
This might work for office supplies, but for construction firms navigating the waters of insurance and risk-management, partnering with a good agent is critical for putting-together the right coverage package.
We’ve written an article to guide you in the right direction as you make this decision, discussing 4 things to look for in a construction-niche broker.