Construction Insurance Bulletin

Required by law, Workman’s Compensation Insurance, usually, called worker’s comp protects your employees from injury, illness, and even death that is work related.

Shop Around

Using statistics from The National Council on Compensation Insurance (NCCI) insurers determine high and low risk industries. Within the industry, individual employer safety records help when determining a specific insured’s premium. Like everything else, you buy, shopping around pays off as rates do vary from company to company.

Your construction company’s experience part of the premium calculation comes from the three-year rolling average of claims made during the prior four years. The four years comes about, as there is a lag period of one-year.

Employees on a Job Site May Have Other Recourse

Imagine you are a plumbing a subcontractor on a construction job. As the project is multi-stories the general contractor had scaffolding erected. One of your employees was on the second floor running some pipe, and the scaffolding gave way. Your employee fell two stories and severely injured his back. Because of his injury, he suffered three months of no work (lost wages) and required extensive physical and occupational therapy (medical costs). Extended physical labor is out of the question as it causes a great deal of pain (disability claim). It looks like you will take a hit on your workers comp experience rating, as this is a large claim.

But wait, you may want to join with your employee or your insurance company in a lawsuit against the scaffolding company as an investigation proved the scaffold was improperly put up. The scaffolding company had other similar lawsuits against it yet the general contractor hired them. Your employee and your workers comp insurance company can sue the general contractor for negligence in hiring a company with a bad safety record. If the insurance company receives an award because of the lawsuit, the hit on your experience rating is not as bad. The impact on your future premiums is less than if your insurance company paid all expenses related to your employee’s claim.

Take-Aways

* Comparison shop for the best rates for your construction company’s worker’s comp insurance.
* Depending on the circumstances of the injury, others parties could be responsible under product liability or third-party liability claims. Work with your insurance company to keep their payout as small as possible to keep your premium low.
* Employers with good safety records pay less than employers who have poor safety records.

All businesses have an obligation to offer a safe and healthy workplace for their employees. This obligation is more than a moral one; it is the law. According to the federal website Business USA, in 2010 more than 3.1 million nonfatal injuries happened to workers while on the job. The site explains further:

“Under the provisions of the Occupational Safety and Health Act of 1970, as the employer, you must provide a workplace free from recognized hazards that are causing, or are likely to cause, death or serious physical harm to your employees regardless of the size of your business. The Occupational Safety and Health Administration (OSHA) was established to create standards and regulations that implement the Act.”

The number of pages that OSHA has for implementing, regulating, and enforcing workplace safety is in the tens of thousands — far too many to go over in one blog post. But, OSHA requires all employers to have a plan for when an employee suffers an injury or illness on the job. Following are some tips to help you with yours.

1.  Seek medical attention. Sometimes, injuries do not have symptoms for hours or even days after they occur. Have a doctor check your employee out with the tests they consider proper.

2.  Document the incident as soon after the incident as possible. Talk with anyone who saw the incident. Take photos and if needed, draw diagrams. Your business should have an accident/injury report form. Make sure your documentation complies with OSHA reporting and documentation record keeping policies. The rules differ for small employers (10 or fewer employees) but your worker’s comp carrier also may have specific documentation requirements no matter what size your business is; check with them.

3.  Provide reports, if applicable. While all businesses have OSHA regulations governing them, some states have added requirements. The United States Department of Labor provides state-by-state reporting requirements.

Every state requires you to carry worker’s comp insurance for good reason. In addition, under OSHA you need to pay for medical expenses and give injured employees short-term or long-term disability leave.
OSHA and worker’s comp exist to protect employees from on the job injuries and illness and to care for them if such incidents happen.

Best practices and laws, policies and rules are important foundations for building a workplace safety program. But, they are not nearly enough. A truly safe working environment is then management and line employees share in the workplace safety effort. Employees who name a hazard should never feel threatened or that he or she will be subject to recriminations. Words of praise are the least for alert people and tickets to a sporting event, movie, or show let them know their alertness counts. Following are some common issues found in most workplaces that management and floor employees should look for.

1. Identify Hazardous Places
When employees first start, assign a person to take them on a tour. Point any places that are hazardous, even if proper signage is up. Explain to new employees the nature of the hazard and if they need protective clothing in the area.

2. Instruct employees in a way to maintain the right posture to protect their backs.
People, who work at desks, keep your shoulders lined up with your hip to avert back issues. Any worker who has to pick something up needs to know the correct position of the back to avoid injury. So do not stoop or twist. Whenever possible use ergonomically designed furniture and equipment to protect your back. Ergonomic equipment and furniture help keep your muscular-skeletal system in the proper place.

3. Report unsafe conditions.
The span of management keeps getting larger. Managers have more difficulty walking through their areas to make sure all areas are safe. They are dependent on their workers to help find unsafe conditions. Safety is everyone’s job — as soon as you suspect a condition is not safe report it to your manager.

4. Be aware of your surroundings.
If you work on a factory floor, in the fulfillment center or a warehouse be aware of your surroundings. Forklifts are racing around keeping to their schedules and intersections are especially dangerous. Walk the floor with the same caution, you do when crossing the street at a busy intersection.

5. Dress for safety.
Always make sure you have the proper safety equipment on. Hard hats, goggles, ear protection, and other safety items significantly cut the amount of employee injuries and illnesses.

Managers who share these and other safety tips with their team show that they care about their employees past “legislative directions.” This caring attitude goes a long way towards employee safety awareness, less on the job injuries, and higher productivity thanks to improved morale.

LEEDS protocols can be tough taskmasters. The increased record keeping and verification requirements stagger an already paper-choked industry. So how can you comply with LEEDS in a risk managed culture?

First, organize. Separate the LEEDS protocol into two main concerns. Materials, products and installation issues; and waste and recycling issues.

Check deliverables for compliance, waste is in the details. Do the materials or products match the specification? If not, source the correct item and send back the deliverable. Don’t wait for the mismatched product to show up on site.

Source materials as close to the site as possible. One of the more difficult LEEDs requirements concerns transporting materials long distances. Transportation and sustainability coexist uncomfortably.

Check every delivered item to confirm compliance with the LEEDs requirements. You may need the documentation to earn the correct ranking.

Plan trash reduction, recycling and removal from the site. Confirm these rules are followed by every contractor. Most construction scrap material can be recycled. Excess product can either be left on site as replacement parts for maintenance or taken to the next site. The next site, however, may not spec that product.

Risk management begins with identifying and assessing risk. Checking deliverables and managing waste implies a gatekeeper on duty to record everything in and everything out. This solution is exactly correct.

Risk reduction, or in this case, increased compliance implies a coordinated effort. Take a leadership role in recycling and trash reduction. Be innovative. Reward active participants in some small way.

Reducing the volume of excess material brought to the site might require simply limiting storage or lay down space. Force subcontractors to right-size their incoming material orders.

Finally, commission the final product. Commissioning companies find defects or confirm completion. Either way, you have the opportunity to correct LEEDs defects or rejoice in a job well done.

Leeds is about documenting the process. Confirm and document everything, every day on the job site. The audit will move along much smoother.

Brownfield sites are environmentally impacted properties which have been okayed for development based on risk assessment rather than strict regulatory compliance. So, if it’s cleared, what can go wrong?

Coordination Problem #1: If the cut soil cannot be reused on the site, and it is impacted soil, you still pay an environmental tipping fee at a disposal facility, if they accept the soil.

Civil engineers do not always know where the impacted soils are, or what to do with them. Environmental engineers do not always know where the building excavations are planned, utility trenches or storm water structures go.

A better plan can be devised if both sets of engineers give input.

Efficient utilities with a minimum impact on contaminated soils. One or the other costs money.

Coordination Problem #2: Will laborers be working in contaminated soil? Any confined space or similar conditions may require respirators and protective clothing and gloves.

The civil engineer may not know the sanitary sewer at eight feet below grade will touch impacted soils. When the fumes enter the trench, work must stop. The trench must be ventilated. Special personal protection or specialty crews must be brought in.

Wouldn’t you rather know these conditions in advance?

Coordination problem #3: Where can you take the soil?

If the environmental engineer knows what soil is likely to be disturbed, they can sample and test the soil for landfill criteria. This process takes about ten days of laboratory time. Spend the money in advance rather than shutting down the site waiting for manifests to move the soil.

More coordination between civil and environmental engineers is required than is often allowed. Together, they can resolve many costly delay problems in advance.

And, it doesn’t hurt to have the structural engineer or architect in these meetings. As they may be unaware of the issues raised by their design, coordination often leads to a better project.

The construction business evolved over the past many years to a more brokered business. Thirty years ago a general contractor landed on a site with a dozen workers to build most of a building. Now, specialists combine to do everything from site clearing to painting stripes on the parking lot.

The general contractor and some of the subcontractors handle paperwork, verify completion, and handle payments to subcontractors. They’ve become service companies rather than construction companies. Construction managers rather than builders.

Insurance recognizes this change as moving from a completed operations liability risk to a professional liability driven risk. So, what does that mean to you?

General liability insurance covers the site premises and the process of physically building a structure. Professional liability covers issues concerning planning, designing, verifying designs and plans, surveying, advising, coordinating and most compliance. The two policies do not overlap in any significant way.

Even if you are not technically a design build firm, if you verify design, or if you interpret the design in any way to build, or if you substitute or allow the substitution of materials or products to build, you are redesigning the building.

Under current energy codes, energy to light a room is restricted. If you substitute or allow to substitute a less energy efficient or higher wattage light fixture for a more expensive, hard to find specified fixture, you changed the energy design, the functioning of the energy system, and will fail to meet compliance with the energy code on commissioning. Sounds harsh, but that is today’s professional liability risk.

Rethink your procedures beginning with the decision: which type of business do we want to be?

If you want to build structures, consider a protocol which sends a “verify the source” request for information on unknown or unfamiliar materials or products. And think about getting some professional liability insurance anyway for those unusual field decisions made to expedite completed operations.

Getting the job. It’s a tough task where too much optimism can cost dearly, too little can cost receiving the bid. If too many low bids occur, who’s responsible to the stockholders?

Because the construction industry works by a bidding system rather than a negotiated contract, errors can be difficult to remedy. Leaving out the painting number on a half-million foot office building costs dearly.

Computerization of the bid process has helped and hurt. The program will not allow forgotten inputs, but people tend to believe a computer generated number.

Quality control for bids is essential for survival, both for the estimator and the executives. The estimator calculates the bid, but the executive signs the contract.

The decision to sign the contract drives the scrutiny if money is lost. Directors and officers insurance protects the executive financially when stockholders seek redress in response to a catastrophic contract.

Getting fired is the lesser issue to being sued for incompetence or fraud. The directors and officers exposure boils down to one unfortunate fact. The covered position must make decisions in real time ahead of perfect knowledge; the claimant has the benefit of hindsight.

You can protect yourself by knowing your duties as a director or officer:

1. You must act in good faith and give prudent care in your decisions.
2. You are required to be loyal to the business.
3. Disclosure: you must disclose material facts to regulators, other board members, officers, creditors,
bondholders, stockholders, and other potential investors.

Implement a policy of redundant checks on all contracts, bids, offerings, scopes of work, payments, or any other routine agreements which can lull people into complacency. Routine hides defective work well.

Spot check bid numbers against industry averages, or have this capacity in the computer program. If you’ve been in the industry awhile, check your gut instinct against the line items in the bid. If they don’t make sense, recheck. Consider every contract your responsibility, otherwise they may come back to haunt you.

How does proper maintenance help reduce liability and workers compensation claims?

The obvious maintenance issues, like brakes on trucks or a proper source of electricity, are usually attended to on a schedule. People are aware of their importance.

Extend this awareness to the smaller items which should be checked daily. If these safety items go unchecked, major injuries and property loss will occur.

Of course, each employee should check their safety equipment and personal protection for fit.

Assign someone to walk the perimeter of the site to assure safety fences, silt fences and security measures are in place and undamaged. Visually inspect any areas where fuel is supplied to assure no leaks have occurred and secondary containment is in place.

Regular maintenance as a daily pre-check list on any mobile equipment pays dividends. Check all fluids, greases, electrical connections, fuel supply, battery charge, brakes, tires, tracks and hydraulic systems. Failures in any of these items can cause catastrophic losses.

Power tools should be inspected daily. Are plugs properly grounded? How about the extension cords? Any cuts or nicks in any electrical cord? Are blades sharp and unbent?

Even hand tools need an inspection. Look for stress cracks in metals like hammers, chisels or screwdrivers. Check the grips for wear and slipperiness. Recheck the daily activity list and assure all tools, supplies, equipment and labor are on site.

Fix or replace defective items. Now work can begin and continue safely and uninterrupted.

Equipment suddenly shutting down or tools breaking during work can be avoided with inspections and maintenance. These incidents create unsafe work places. Loads shift and fall, shrapnel flies, saws lurch. All avoidable.

Consider these issues occurring while working around other people and their property, as is often the case on construction sites. Liability is quickly assigned to people who work with defective equipment and tools. Daily pre-work maintenance checks are essential to reducing liability and workers’ compensation claims.

They have a reputation for being a bit dogmatic, but if you embrace this quality, loss control engineers from the insurance company can be great resources. And why should they compromise when it comes to employee safety.

Safety involves properly planning and preparing to do each job correctly. Isn’t this goal shared by your production team?

Safety planning, like any standard operating procedure, begins with defining the task at hand, just taking a moment to think through the process. Consider the risk associated with the job.

Your loss control representative probably has safety procedures, equipment and personal protection requirements written for most tasks. Request these and incorporate them into your processes.

Create a safety culture for your business. Safety is and should be provided as the number one employee benefit. Ask your insurance company representative to provide lunch pail topics or handouts, OSHA bulletins, or safety posters.

Executives should embrace the safety messages and be part of the prevention and investigation team. Learn from the labor force – they have more time to consider safety issues, and more incentive.

For example, if a specific safety procedure is a constant source of complaints, work with the staff affected and the safety engineer. Some procedures or protective equipment can be modified if bottom line safety is not compromised.

Take responsibility for the on-the-job safety of your employees. Don’t blame the insurance guy for requiring hardhats or keeping the public out of your garage area. Own that responsibility. Require proper personal protection, restrict the public from dangerous work zones.

When the safety inspector makes an appointment, embrace their knowledge and bring up any concerns you have about your operations. Let them know in advance, and you’ll get a few good, useful tips.

If you have in house safety staff, instruct them to listen, safety is a collaboration of good ideas.

Great news! You won the contract to build that new project. You’ve seen to the details, like sending certificates of insurance to the owner that meet their workers’ compensation and general liability requirements. And now, you begin gathering submittals, shop drawings and change orders. What’s missing?

Have you ever considered the engineering, value engineering or design aspects of these documents? General liability excludes these critical services from coverage. Let’s delve into these grey areas.

Any time you vary from the architect’s or engineer’s drawing, you are technically redesigning the project. Obviously, many changes are minor and inconsequential to the overall building strength and endurance. But many seemingly minor changes do corrupt the building systems.

Suppose you can’t find a specific light fixture and substitute a slightly less efficient one. You probably just violated the newest energy codes. Since energy code compliance is design driven, you may have inadvertently stumbled into a professional liability claim.

When the architect gets sued for the compliance issue, he’s going to prove his design was scrapped and point to you. This claim becomes a grey area. Did you fail to complete your operation correctly, or did you redesign the energy usage for the building? Most of the former, some of the latter is correct.

Do you build or use pre-fabricated components? Roofing structure comes immediately to mind. Does the manufacturer submit drawings for the structural design? Do you endorse them?

Does your company do any construction management, even as an expediting process? How about value engineering?

When you submit change orders, do you suggest better design or function elements in your request?

These actions reflect professional consulting, design or engineering. Errors might be treated as professional liability claims.

There is an element of design and value engineering in every decision. Where the grey ends is a difficult line to draw. Be aware of this issue.

Suppose you use a high-early concrete mix so you can get steel up quicker. Do the long-term setting qualities change the structural integrity? Memorialize this question in a memo to the project architect or engineer; let them decide.

If you do actively engage in consulting, value engineering or design work, purchase professional liability coverage regardless of project insurance requirements.