Construction Insurance Bulletin

1. dizziness or fainting

2. headaches

3. tremors

4. stop sweating

5. fatigue

6. nausea

7. sudden weakness

8. anxiety

9. cramps

• The individual is evaluated mentally, emotionally and physically to help determine

realistic personal goals

• An intervention designed to improve performance towards the long-term goals proposed

• Evaluation of progress to assure success or indicate revising the plan.

Operations concerns work in progress such as constructing the steel for a bridge. Completed operations is the finished process or scope of work put into its intended use by someone other than another contractor.

The steel skeleton is an operation when the concrete subcontractor pours the decks. It’s a completed operation when traffic begins to flow whether or not the guardrails are functional.

Completed operations liability covers the consequences of faulty work, not damage to the faulty work, but bodily injury and property damage as a result of the faulty work. The steel isn’t covered but the car it lands on is.

Three tests must be met to secure completed operations coverage for a specific claim:

1. The bodily injury or property damage must arise from your work product or completed

operation.
2. The claim occurs away from insured premises – owned or rented.
3. The work must be completed or abandoned when the injury occurs.

The subcontractor exception can be difficult to understand:

1. The exclusion does not apply to work done by subcontractors.
2. The exclusion does not apply if the damage arises out of work by a subcontractor.

If your general contracting company installs an HVAC system incorrectly that burns the building down; your work will not be reimbursed by your insurance carrier, but the work of your subcontractors will.

If a subcontractor installed the faulty system, all the work will be reimbursed by your insurance company. Of course, your company will likely subrogate, that is sue, the subcontractor.

The best risk management technique for this exposure is only perform work within your expertise and subcontract the balance of the contract, and perform quality control inspections on your work and that of your subcontractors. Document specific work completed by your subcontractor. Test your materials and fix defects as you work on the project.

Make sure your work is completed correctly to your satisfaction before releasing the project for its final use.

Environmental liability, as a legal issue, is in its infancy; but maturing quickly. The challenge for contractors involves staying ahead of the evidence chain.

Since you don’t know what hidden environmental tort will arise next, prevention and documentation protocols challenge your risk manager.

The following list includes our best guesses:

Moisture
Document the moisture content of the internal parts of any building structure. Mold, mildew and bacteria thrive when the moisture content on surfaces is between 16% and 19%. Your goal is to dry areas out to below 15% moisture content.

Invest in a moisture meter and record readings before walls or ceilings are enclosed. Rain or humidity can bring the moisture content up. If anyone opens the walls or ceilings, document the potential change in writing to that contractor.
Chemicals
Any chemicals, whether used on wood destroying pests, specialty paints or to vapor seal a slab, are prone to migrate through a vapor phase within or through a building.

Document the products used and any safety data available currently.

Vapor intrusion will be a highly litigated issue over the next twenty years. The challenge is to prove whose vapors they are. Similar products contain same chemical families which can change and vaporize.

It is your risk management challenge to disprove your products involvement. And, look into buying and keeping records on all environmental insurance policies. Keep these records because they are a long-term investment in risk management.
Materials and Supplies
Remember the formaldehyde sheetrock? Know your suppliers and vendors and ask for environmental insurance certificates.

Buy paints and oils that are low in volatile organic compounds like toluene or xylene. These chemicals are used as drying agents, and thus they do not add to aesthetics.

Try to avoid any additive that will vaporize over time if used correctly.
Concrete Additives
They are great for aesthetics and ease of placement. Vapor intrusion through concrete floors will be litigated heavily. If you use an organic chemical to improve the floor or seal the floor, you will be dragged into every lawsuit affecting that building regardless of the source of contamination.

Document the chemicals used and monitor the results right after placement, that will be the maximum flux rate.
Fuel Inventories
Document no fuel spills on any site where you use fuel. Keep an inventory and take pictures of proper fuel storage with secondary containment.

If a spill occurs, mitigate the damage immediately by remediating the spill.
Document and maintain records on any potential environmental issue. Be sure to include evidence that you exceeded then state-of-the-art selection and prevention methods. Remember asbestos too.

Consider sending in submittals which are slightly different than the plans require. Today’s energy requirements limit wattage for lights in new buildings, for example.

A fixture or a bulb can cause the energy plan to go over budget. Is the implication that you are using the wrong product or that you are redesigning the energy grid? Suppose you install the energy inefficient product and it holds up commissioning and the Certificate of Occupancy. Is the claim against the product, the completed operation or the professional design?

Every product has been designed for a purpose. If you install that product for that purpose, and your installation is per product specifications, defects are considered product liabilities.

The architect and engineer draw plans and specify products to be used. If you follow those plans and install those products, your work will be a completed operation.

If the plan calls for your specialty to design some aspect of the building, you will have a design liability.

The grey areas concern modifications to the product or design outside the scope of work.

Completed operations insurance does not cover design liability except in very minor cases.

Consider loss control for these situations. Either avoid them, wise choice, or purchase some professional liability insurance for design professionals, and get an architect or engineer stamp.

With energy codes, LEEDS certifications, environmental issues, and historically standard conditions to meet, alterations to any aspect of the project drawings can have devastating effects to the building commissioning.

Be hyper cautious when altering plans or using replacement products. Request a substitution change order if products are unfindable or at least the specifications are unmatchable. Suggest design changes in writing in change orders, even the most minor changes. Your not out to be thorough, not difficult. 

For inland marine purposes, all terms such as contracting or equipment take on broad interpretations and definitions. Equipment means any tool, vehicle, material, supplies, or machine that serves in the trade of the policy holder and is not fit for highway use.

Highway use becomes fuzzy when empty vehicles are highway legal but the fully loaded vehicle is not. Consider the use of the vehicle rather than the vehicle itself.

Contractors eligible for this coverage can include ship builders, farmers, snow removal companies, even government agencies.

These are non-filed forms which means the underwriter and company have broad authority to fit coverage for individual companies.

Some standard language defines mobile equipment as mobile or floating nature. This definition allows quite large and semi-permanent machines to gain coverage under mobile equipment forms.

Blanket Form

Covers all tools, equipment, machinery, tracked mobile devices, drilling equipment, everything right down to a screw driver.

The contractor simply pays for one limit. If a list of equipment is required, the larger items are listed with serial numbers, the smaller items are grouped as hand tools, garden tools, or other general description.

Scheduled Form

A schedule form lists each item individually with a description and value. Accuracy counts. These forms will normally cover newly purchased, rented or leased property for thirty days.

Reporting Form

Requires the insured to send in a report of values for each month or quarter on each jobsite. The advantage is paying premium on only those values actually at risk. These forms will also cover newly acquired property for thirty days.

The equipment, tools and machinery investment on a site is significant. While in storage back at the yard, these items may be covered under your building and content policy. Look into the best inland marine form for your operations. 

General liability forms now contain some detailed and extensive exclusions of coverage, particularly for contractors. The automobile exclusion is a few sentences while the environmental exclusions or personal injury wording can exceed a full policy page.

We draw a distinction here between excess liability and umbrella liability. Excess follows the underlying coverage form, it extends limits, not coverage. Umbrella liability extends coverage and limits.

So, how does umbrella coverage help contractors?

Scenario 1: Conflicting Liability Exclusions: inland marine or automobile

Liability for operating inland marine equipment, in this scenario, a truck mounted drill rig, falls under operations liability under the general liability policy.

In this case, the drill rig is mounted on a highway approved vehicle, a pick up truck.

If the truck were in an accident on the highway while carrying the rig to a site, no doubt the business automobile policy would cover the damage.

If the drill rig bit broke while operating and flew through a windshield on site, general liability would pay the damages.

Now, suppose with the rig tower up, the pickup truck rolled in the project parking lot injuring the project owners. Business automobile might decline since the rig tower was extended, use; and general liability might deny the claim since the vehicle was on a travel surface and simply transporting the rig.

The umbrella carrier would have to respond in either case. That coverage will unify the liability limits even if they need to subrogate both other policies.

Scenario #2: No Underlying or Excluded Coverage

Employment Practices Liability (EPL) or environmental issues are the best examples now. Some general liability policies exclude personal injury liability, which overlaps EPL. Very few umbrellas exclude either coverage.

Most general liability policies have lengthy and detailed exclusions for environmental liability. Umbrella policies do not have detailed exclusions so some area of coverage exists.

You would pay a retention ($1000 to $25,000 typically negotiable) and turn the claim over to your umbrella carrier.

So much liability language aims to exclude contracting scenarios, it pays to capture broader and unifying coverage like umbrella liability.