Construction Insurance Bulletin

Unfortunately, mishaps on construction sites are all too frequent. The combination of multiple activities with dozens or hundreds of people operating complex and dangerous equipment, often in poor or threatening weather, can easily result in accidental injuries to workers, clients, visitors, and onlookers, leading to litigation that could cost you millions – or even put you out of business.

Construction Liability insurance will pay for legal damages (and legal costs) for worksite accidents that cause; 1) loss, damage or destruction of property, and 2) physical injuries to third parties. Thanks to the explosive growth of lawsuits in the business world, almost all building contractors will need to show that they carry a Construction Liability policy before they’ll be allowed to bid for a job.

Contractors sometimes buy this coverage on a General Liability basis, up to the amount of the policy. However, they often prefer a policy that covers an individual project over a set time at a fixed dollar value, based on such factors as the number of workers or contract employees, and the size and nature of the operation. Some types of construction jobs – such as roofing, foundation work, and high- rise or large scale commercial projects with more workers per site – are more risky than others.

Your Construction Liability policy will probably set maximum amounts both on a “per incident” basis and for “umbrella” coverage. It should also include Personal and Professional liability for acts by company owners and managers, and cover damages from fire and medical-related claims from incidents on the job site that don’t fall under a standard Workers Compensation policy.

We’d be happy to review your firm’s exposure to the construction-related liability risks you face and recommend a comprehensive protection package that can help give you peace of mind on the job.

More construction companies are stressing the relationship between workplace safety and employee wellness initiatives, Says Rik Kunnath, executive chairman of Pankow Management Inc. (San Francisco), “Among a lot of companies, there’s a growing awareness that for workplace safety programs to really affect behaviors, there needs to be a culture of deep concern for the well-being of employees.

Unfortunately, Pankow came to this awareness only after several on-site fatalities in the early 1980s forced the company to re-evaluate its workplace safety priorities. According to Kunnath, “That led to some soul searching as to whether we were really doing all that we could to work safely, and whether our drive towards high rates of production were overwhelming the safety message. It’s unfortunate, but sometimes having a deep personal commitment to safety is triggered by an accident or an incident.”

Over time, Pankow’s commitment to protecting its workers has expanded to include a far broader view of their overall health, and the role of workplace wellness programs in reducing on-site injuries. “In the beginning”, notes Kunnath,” there was some concern that by taking this view of our values, our safety programs could get watered down as they compete with other wellness initiatives, but if anything, the opposite has occurred.

“Everyone knows that nothing we do as an industry has a higher potential for injury than field operations, and that always has to be our most important focus,” he adds. “It’s just that it’s a lot easier for employees to accept your safety message when everything else you do in your interactions with them says that your concern for their well-being is real.”

Words of wisdom.

A resurgent construction industry needs to do a better job of keeping workers safe. That’s the bottom line of a recent report by Marsh Risk Consulting.

Based on data from the U.S. Bureau of Labor Statistics, the study, “Building Safety and Leadership in the Construction Industry,” notes that the industry’s 2012 fatality rate increased to 9.5 per 100,000 workers from 9.1 per 100,000 in 2011. The 775 construction-sector deaths in 2012 marks the first annual increase in work-related fatalities since 2006.

According to Marsh, fatalities will probably continue to rise without concerted industry-wide safety improvements, as an ongoing shortage of experienced construction workers leads to widespread promotion of unskilled workers into supervisory roles. “The increase in new construction activity is bringing an influx of new, inexperienced workers,” states the report. “In this environment, some contractors are stretching their hiring standards to meet project demands.”

Marsh recommends that construction firms focus on training management to ensure effective leadership and help build a culture of safety throughout their organizations.

“As the economy grows and the number of new construction projects picks up, now is not the time to be lax on safety,” warns John Moore, a construction safety specialist in Marsh’s workforce strategies practice. “Inadequate safety performance can lead to employee turnover and legal, financial and reputational risks. Investing in high-quality leadership will go a long way toward retaining valued workers and maintaining a safe work environment.”

The more you do to keep your workers, safe, the better for all concerned– and the lower your insurance costs. We stand ready to offer our advice on developing, implementing, and enforcing workplace safety standards. Just give us a call.

Chances are that you’d never buy a new truck or front-end loader without trying it out to make sure it could do the job. Do you do the same for the vehicle’s operators?

Safety experts recommend that any employee who will be driving a truck should receive a road test of his or her driving skills before being hired. The examiner should be fully qualified to operate the vehicle, and familiar with the prospective operator’s past experience. The test should include all the necessary skills:

• use of all controls; traffic operations (including backing, parking, slowing, stopping, passing, and turning)
• general driving habits, such as alertness, stamina, and patience
• driving rules and regulations pertaining to the vehicle
• handling the necessary actions/equipment for loading and unloading the vehicle

For each skill or knowledge area, the applicant should receive a pass/fail grade. Each area of weakness should lead to further training or a corresponding limitation in the scope of the operator’s approved activities. Keep records and scores of these tests as documentation in the event of an accident or claim resulting from a driver’s actions.

For more suggestions on the format or content of driver exams, contact your trade association, state department of motor vehicles. Don’t forget the benefits of a solid driver training and testing program in keeping your Commercial Auto insurance rates under control.

Your drivers are taking your vehicles and your insurance coverage on the road every time they get behind the wheel. Wouldn’t it be a good idea to make sure that they’re capable of protecting both?

For more information, feel free to get in touch with or one of our agency’s risk management professionals.

More and more construction contractors are using mobile and Web-based software solutions to qualify subcontractors, keep workers safe, and manage their vehicles and equipment.

For example, Weitz Co. (Des Moines, IA) uses a centralized electronic project bid and prequalification submission database for its subcontractors that has significantly reduced the labor and time needed to process submissions. Says Vice President of Risk Management Maria Matamoros, “We’re already seeing enhanced consistency in our pre-qualifications, and it’s helping us generate a high-quality subcontractor pool.”

Hoar Construction (Birmingham, AL) has a Web-based portal through which managers use their company-issued iPads to file state and federal inspection site inspection forms and access subcontractor evaluation reports, as well as a digital library of safety manuals and tutorials, “More importantly, it has allowed us to keep our superintendents and our project managers in the field,” according to Hoar Corporate Safety Director Bart Wilder, “which gives them more time to evaluate and find ways of mitigating risk.”

Goodfellow Brothers Inc. (Kihei, HI) upgraded its fleet with wireless handheld transmitters that operators use to submit daily inspection reports on their vehicles. During the two years since the upgrade, the company slashed its Auto Liability losses by more than 70%.

However, contractors need to make sure that new risk management technologies are compatible with their operations and workforce. “One size certainly does not fit all,” warns the Weitz Co.’s Matamoros. Goodfellow President Chad Goodfellow describes the new system as “a challenge for some of our people and for our management, because we want to demonstrate that we do trust our employees, but at the same time, we have to trust and verify.”

To learn more, please give us a call.

Following these principles of leadership will help you and your employees focus on job safety:

1. Don’t walk by. It is everyone’s responsibility to prevent any potentially unsafe acts and conditions they witness from turning into accidents.
2. STOP! Encourage employees to stop working whenever they feel unsafe, no matter what reason they give.
3. Focus on a safe working environment. If you expect your workers to work safely, make their workplace as safe as possible.
4. Don’t blame the worker first. Unsafe ways of working, accidents, incidents, and ill health aren’t necessarily the worker’s fault. The problem often comes from less obvious causes, such as decisions by management.
5. Use your workforce for ideas. Employees often have a more accurate idea than you or your managers about which safety and health practices will work, because they deal with these issues every day.
6. Be patient. Don’t expect quick wins. Improvements will emerge over time, but only if you stick with them.
7. Explain your decisions. Just telling workers that something is wrong or a safety risk isn’t enough. If they’re to act on the information you provide, they need to know why and how to avoid harm.
8. Lead by example. Your behavior sends powerful signals. If you carry out your job in a safe way, your workers are more likely to do the same. If you don’t, they won’t imitate you.
9. Focus on co-operation. Treat your subcontractors in the same way as employees by encouraging them to communicate with each other.
10. Don’t neglect occupational health. If you look after the health, as well as the safety, of your workers today, you’re less likely to create problems for them or your business tomorrow.

Sound advice!

Each year around 1,000 trips or slips on construction sites result in fractured bones or dislocated joints, often leading to permanent disability, harming workplace morale, reducing productivity, and raising insurance premiums. Many of these accidents are due to negligence in dealing with building materials or waste.

Safe site operation requires co-ordination between the client, contractor(s), and suppliers. Before beginning a project, agree with the client on arrangements for handling materials and waste. Larger projects should include this agreement in the construction phase plan.

To reduce the risk of mishaps in storing materials, experts recommend that you:

• designate storage areas for materials, waste, and flammable or hazardous substances
• don’t allow storage to ‘spread’ on walkways or store materials where they might obstruct access or interfere with emergency escape routes
• store flammable materials separately and protect them from accidental ignition
• install guard rails if materials are stored in high places
• keep all storage areas tidy
• plan deliveries to keep the amount of materials on site to a minimum

In dealing with waste, decide how to manage waste streams produced during construction and assign responsibility for collecting and disposing of these materials on site.

Waste risk reduction guidelines include:

• Have all flammable waste materials (such as packaging and lumber) cleared away regularly to reduce the risk of fire
• Make clearing waste a priority for all workers, and be sure that everyone is on the same page
• Include enough space for waste bins and containers in accessible locations, and set a schedule for collection
• Provide carts or chutes for safe removal of waste from the building safely

Our construction insurance professionals stand ready to advise you on keeping your workplace safe.

No matter how much care you take to keep job sites safe and finish projects according to specifications, accidents happen. Consider these scenarios:

• an improperly installed kitchen cabinet shelf in a home you built collapses, injuring the owner
• one of your employees posts a blog accusing a competitor of shoddy workmanship
• a visitor to your worksite trips over an air hose, falls, and fractures her leg

To protect your business against the financial threat of costly litigation from such all-too-common mishaps, you need construction liability insurance.

This coverage will pay costs and legal expenses, up to the amount of the policy, for something your business did, or failed to do, that damages a third party, related to 1) your products or services (products and completes operations); 2) allegations of slander (personal and advertising injury); or 2) injury on your premises or job site (medical expenses).

As a common business practice, both residential and commercial clients will require you,and your subcontractors, to show evidence of construction liability insurance before starting a job.

In general, residential contractors should buy coverage two to three times the amount of the construction budget. Commercial contractors usually carry policies in the multi-million dollar range. Firms that face higher risk of damages, for example, roofing contractors or those in specialized trades, tend to have more coverage. Some contractors prefer to pay their premiums up front, while others make a down payment and finance the premium over the policy period (six months to a year).

No matter how large or small your business, having comprehensive construction liability insurance is always the best policy.

We’d be happy to review your situation and recommend the coverage that’s best suited for you.

Environmentally-friendly construction, also known as “green” construction, is increasing rapidly in the United States. Concerns about global climate change, U.S. dependence on foreign sources of energy, and rising energy costs are inspiring individuals and businesses to construct buildings with a reduced carbon footprint. This trend has important implications for settlement of insurance claims when green buildings suffer damage.

A green building is one that has met the requirements for Leadership in Energy and Environmental Design (LEED) certification. The U.S. Green Building Council developed LEED in 1998 as a way to help building owners identify and use practical and measurable designs, construction, operations and maintenance practices that are environmentally-friendly. Green buildings are, compared to standard buildings, more energy and water efficient, produce less carbon dioxide, and have a healthier indoor environment.

Some states and municipalities have begun to adopt building codes that require elements of green construction. California has imposed tougher water efficiency standards on new residential construction; New York City is considering more stringent energy-use standards for large buildings. The impact of these requirements on construction costs will vary by location. Green construction might require specialized materials and methods; in the near term, contractors with expertise in these methods may be relatively scarce. Therefore, in some places the cost of complying with green building codes could be higher than building with standard materials and methods, and that will impact insurance coverage.

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The factors that will influence the claim include:

• Whether the green building code applies to new construction only or also to major renovations.
• What the code defines as a “major renovation.” Some codes might consider renovations affecting more than a specified percentage of the building’s area as a major renovation.
• How will use of green building materials affect the building’s appearance? The property owner might lose enthusiasm for a repair if a change in appearance will lower the building’s market value.
• How will the new materials interact with the existing building components? Will integrating the new materials increase rebuilding time and cost?
• Are qualified contractors available in the area?
• Will wait times for green contractors and materials result in costly project delays?
• How does the building code apply in the event of a large natural catastrophe, such as an earthquake or hurricane? Must property owners meet the higher standards at a time when hundreds of properties have suffered damage?
• After a catastrophe, will there be long wait times for contractors to haul away debris because of overwhelmed landfills and recycling centers? Will there be long wait times for building inspectors to visit and approve all of the effected properties?

Standard personal and commercial property insurance policies provide very limited amounts of coverage for ordinance or law” losses — extra costs incurred to meet local building requirements. Additional coverage is available; property owners in areas with green building codes should speak with our insurance agents about options and costs.

Research and publishing company McGraw-Hill Construction has predicted that the market for non-residential building retrofitting with green construction will grow to $15 billion by 2014. Property owners and insurance companies will have to address these questions much more often in the near future; the time to answer them is before the losses occur.

Key personnel tend to be one to two people that your company heavily relies on. These employees can be anyone from a partner to an operations manager or a site foreman. The contribution of these key personnel is essential to run your company. If one of the key personnel dies, where would you find the financial resources to keep your business up and running until you replace them?

The answer is a key person life insurance policy, which your business will receive all or most of the proceeds. This term may also apply to other coverages used for business continuation purposes, including 1) buy-sell or shareholder insurance which will reimburse partners or investors; 2) debt protection; 3) and revenue protection. You can use the policy benefit to replace lost income due to the unavailability of the key person and recruit, develop, and train a replacement.

The policy’s cash value might be available to your business through a withdrawal or loan, if needed. You could also split the premium and death benefit between the firm and the spouse of the key person to ensure that she or he receives replacement for the person’s economic value to the family. These premiums are not tax deductible.

What’s more, this coverage provides a financial asset that enhances the creditworthiness of your company for commercial lending (by ensuring that the business will remain in business if the key person is out of the picture).

When reviewing packages, get quotes on different amounts,anywhere from $100,000 to $500,000. Take into account what your budget allows versus how much the business would need to survive while you’re bringing a new person up to speed.

Our agency stands ready to advise you at any time.