Air, water, and soil pollution pose a serious financial threat for contractors. One small misstep can require thousands – or even millions – to clean up.
Consider these scenarios:
- Remodeling a school kicks up dust.
- Using construction materials generates fumes that pollute the air.
- Hitting an underground storage tank leads to the release of liquid pollutants.
- Spraying to remove a bees’ nest from a work area releases insecticides.
- Tying into a sewer line improperly causes sewage to back up.
Your Comprehensive General Liability (CGL) policy provides severely limited protection against these types of pollution claims. Not to worry! Contractors Pollution Liability (CPL) insurance can protect you. (These policies are sometimes written together with Contractors Professional Liability coverage – see the previous article).
CPL covers Bodily Injury and Property Damage – whether by settlement or verdict – as well as the expenses of investigating, defending, or settling claims. Most policies also cover the costs of removing or neutralizing pollutants and restoring the damaged property.
CPL policies usually include a “hammer clause” that works like this: if the contractor chooses to fight a claim, rather than settle it, the insurance company’s liability for damages and claims expenses is limited to what it would have had to pay if the contractor had approved the settlement. As you can imagine, most contractors choose to settle when their insurer recommends this approach.
As with Contractors Professional Liability coverage, CPL policies are usually written on a case-by-case basis, with the size of the policy depending on your situation (for example coverage might be worldwide or limited to the U.S). Our agency would be happy to work with you, and the quality insurance companies we represent, to tailor a program suited for your needs. Feel free to get in touch with us at any time.
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New approaches to building projects, as well as new techniques, are leading to increased demand for Professional Liability insurance for contractors.
A few years ago, people would shake their heads at the idea of this coverage, asking how contractors could be held liable for professional risk when they don’t provide professional services.
However, there has been a blurring of the once-sharp lines between contractors and architects and designers, as more and more contractors are being drawn into the design process. Under the traditional “design-bid-build” method, a project would be designed, bids put out, and the project built. However, the spread of the “design-build” concept – which decreases the amount of time, and the cost, of the project involved – has meant that medium sized and large contractors often take the design responsibilities in-house, and even subcontract them to design firms.
These contractors’ biggest exposure is for claims filed against them for project delays and cost overruns. However, traditional General Liability insurance offers coverage only for Bodily Injury and Property Damage, and does not cover financial or economic losses. Contractors Professional Liability insurance fills this gap.
Because these policies are relatively recent, only a limited number of insurance companies offer them. These companies haven’t paid enough claims for underwriters to establish the underwriting history and set standard rates – which means that policies are usually negotiated on a case-by-case basis. The amount of insurance can be up to $50 million; if a contractor needs more capacity, coverage can be added through excess layers.
If your firm is (or might be) taking on project design responsibilities, a comprehensive Contractors Professional Liability policy can help protect your pocketbook – and provide peace of mind. To learn more, just give us a call.
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In the construction world, we’re often quick to reprimand our workers about safety violations. Such phrases as “Hey, put your helmet on!”, “Seriously, do you really think this is a good idea?” and “Get off that ladder now!” come to mind. All too seldom, do we say, “Thanks. You’re doing a great job in keeping the site safe!”
As you walk your work sites or wander the shop, it’s important to search out potential hazards and people who are not following what’s expected. However, don’t forget to recognize and acknowledge the workers who are doing their jobs right. When you recognize the power of thanking those who do well, their peers pay attention. That’s the reason why merit badges work.
Whether you’re a supervisor, foreman, or project manager, your job is to encourage safe behavior by motivating – not threatening – your workers as often as possible. Showing gratitude goes a long way in forming your crew and your friends. Take the time, and you’ll soon be surrounded by people who want to work for you. When you recognize this, you will understand the power of thanks.
Without trust, there’s little chance of success in any business – including yours. Your role is to help your workers stay out of trouble and eliminate acts and conditions on the job that can harm them. Whenever possible, it’s better to work with them, rather than acting as an obstacle.
Help your construction crews understand the hazards of the work they do and how to get them corrected. Establish a level of trust, and say “Thanks!” more often than “Stop!”
Remember, you catch more flies with honey than vinegar.
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No matter how large or small the job in the building trade is, it’s always the best policy to carry insurance again liability for losses from injuries, accidents, or property damage during construction.
Residential building contractors need a Liability policy to protect them from lawsuits from homeowners for construction-related losses, or from workers injured on the job. Make sure that your contract requires every sub to carry their own Liability insurance and exempt you from responsibility from damage they might produce during construction. The amount of coverage you need will depend on the size of the contract. As a rule of thumb, it’s wise to have two or three times the size of the project budget.
Commercial contractors usually carry millions in Liability insurance. Contractors with higher risk of damages (for example, roofers or contractors in highly specialized trades) often take out higher coverage.
Your Liability policy will set coverage amounts (limits) for both each occurrence and overall (aggregate) values. Limits are also set for: 1) fire damage to property under construction; 2) medical expenses for injured workers on the jobsite who might not be covered under Workers Compensation; and 3) personal and advertising injury (claims that promotion or advertising caused a financial or personal loss to the owner of the home or building).
While many contractors pay their Liability premiums up front, those with cash flow problems others prefer to finance them through an indemnity corporation with a down payment and monthly payments over six months to a year.
As always, our insurance experts stand ready to help you find comprehensive Liability coverage at a rate you can afford. Feel free to get in touch with us at any time.
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A revision to the formula for calculating Workers Compensation rates is saving premium dollars for companies in a large number of states since the first of this year.
The change involves the experience modification (“mod”), the premium credit or debit that businesses receive for their claims experience. The mod compares your claim experience to that of other firms in your industry; if your experience is good, you’ll get a premium credit if not, you’ll receive a debit.
What has changed is the “split point” between the primary and excess portions of a claim. This value is important because the primary portion of each claim has a far larger impact on predicting an employer’s mod than does the excess portion. For the past two decades, the split point has been $5,000. However, inflation has both eroded the primary/excess split point and hurt its predictive power; the mod doesn’t give enough credit to good experience and doesn’t penalize poor experience enough. The change raises the split point to $10,000 in 2013, $13,500 in 2014, and an estimated $17,000 in 2015.
In 26 of the 38 states that have approved the new formula, a survey of more than 75,000 businesses by the National Council on Compensation Insurance found that 62% of them will see their rates fall by 5% or less this year. Another 11% will enjoy decreases of 5% to 10%, while rates will stay unchanged for 4.5%. Fewer than one in four (22.5%) – mostly larger businesses – would see a rate increase.
Our Workers Comp specialists would be happy to discuss the revised experience mod formula with you – and make sure that you enjoy the cost savings that it can provide. Feel free to get in touch with us at any time.
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Wrap-up or “Wrap” Construction insurance can provide a highly effective tool to reduce costs and avoid headaches in insuring large, complex projects and the workers building them.
Wrap policies usually offer superior coverage, higher policy limits and greater contract certainty than traditional Commercial General Liability, Workers Compensation, and (often) Builders Risk insurance written for individual subcontractors and types of risk. What’s more, Wrap coverage can minimize potential cross-litigation on construction projects.
Although they’ve been available for decades, these policies have become widespread in recent years, due to the skyrocketing costs of raw materials, financing, and litigation. There are two types of Wrap coverage; owner-controlled insurance policies (OCIP), and contractor-controlled insurance policies (CCIP). Either variety allows the owner to spread the risk among different parties, while providing a seamless insurance safety net for every company and individual involved – which can translate into profit, based on loss experienced over the life of the policy.
Because of their extensive coverage, Wrap policies are usually more expensive than other types of Construction insurance for the owner or primary contractor, who will pass on the extra cost among the general contractors and sub-contractors on the project. This is a small price to pay considering the peace of mind that comes from having all coverages and insured parties protected under a single policy.
Because of their complexity, insurance companies often tailor Wrap policies for each project, writing them on a customized (“manuscript”) basis. Our agency’s professionals would be happy to work with you and your insurer in creating coverage that’s comprehensive and cost-effective. That’s what we’re here for.
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