Construction Insurance Bulletin

An electrical contractor runs miles of wiring through what will be a three-story office building. Following completion, the contractor tests the wiring, finds it satisfactory and leaves the job. After other subcontractors hang and paint the walls and do other finishing work, the general contractor tests all systems.

This time, the electrical system fails. The GC summons the electrical contractor back; after more testing and diagnosis, the contractor concludes that there are faults in two segments of the system on different floors and adjacent sides of the structure. Fixing the problem will require tearing out the finished walls and a few appliances attached to them (a dishwasher in an office kitchen area, computer network equipment, etc.).

Tearing these things out, repairing the faulty wiring, and reinstalling the walls and finishing them so they look flawless will cost much more than simply fixing the electrical problem. The cost is far beyond what the contractor can afford to pay out of pocket. Will its Commercial General Liability insurance help? The answer depends on the state where the building is located.

The ISO CGL policy covers the insured contractor’s legal liability for physical damage: 

To tangible property, including all resulting loss of its use, or loss of use of tangible property that is not physically injured; and Caused by an occurrence, which is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

In addition, the policy states that it does not cover the insured’s liability for property damage: 

To work or operations the insured performed or which a subcontractor performed on the insured’s behalf, if the damage arises out of any part of the work and it occurs after the work’s completion; and To other tangible property that is unusable or less useful to the owner because it includes the insured’s work that is known or thought to be defective, deficient, inadequate or dangerous, if fixing the insured’s work will restore the property to usefulness.

Some courts have ruled that the CGL policy covers the cost of tearing out and reinstalling undamaged property when that is necessary to fix the defective work. A 2002 federal appeals court ruling in a Washington state case said that the removal and destruction of other subcontractors’ work due to the insured’s defective work is property damage, as the CGL defines the term. The court also said that the insured’s performance of defective work met the policy’s definition of “occurrence.”

A 2010 decision from Washington state reached a similar conclusion — unintentionally providing defective products to an installer was an “occurrence,” and removal and replacement of other suppliers’ products and work was “property damage.” Courts in Alaska and Oklahoma have ruled that the policy provision that excludes coverage for unusable tangible property did not apply because of a second provision that gives coverage back for loss of use resulting from sudden or accidental injury to the insured’s work. The courts felt that installing defective components was done accidentally.

Conversely, courts in Arizona, Maryland and South Carolina have held that tearing out and replacing undamaged property is not physical damage caused by an “occurrence” because it is not an accident. Rather, the courts saw it as a cost associated with a project.

Since the courts differ so much from one state to another, it might be helpful for a contractor to know in advance what a particular state requires. The contractor’s insurance agent might also know which insurance companies have a history of paying for these types of claims. The contractor could find that it is worthwhile to buy coverage from these companies even if they charge higher premiums.

Your construction business depends on independent contractors who may perform a variety of tasks, including demolition, installation or painting. Because your business depends on quality work performed in a timely manner, use seven tips to ensure you hire reliable independent contractors.

1. Preview previous work.

Check out jobs the independent contractor has already completed. Do they match the scope of your project and meet your quality standards? If so, you can assume the independent contractor will successfully complete your job, too.

2. Do a background check.

Your reputation, business and future career could depend on the work your independent contractors perform, and you could be liable for their actions on the job site. For these reasons, perform background checks and assess the independent contractor’s work history and any recent criminal charges.

3. Check insurance paperwork.

As you must carry contractors insurance for your business, independent contractors must also carry insurance. Inspect their paperwork to ensure they’re adequately insured for construction site hazards.

4. Complete a W-9.

Independent contractors are not employees, and according to IRS rules, they must complete a W-9. This form includes their name, address and Social Security number (SSN) or Employer Identification Number (EIN) and indicates that they are exempt from tax withholding. Reliable independent contractors will readily agree to sign a W-9.

5. Discuss Form 1099-MISC.

The IRS mandates that you must file Form 1099-MISC for all independent contractors who make $600 or more per year. If the independent won’t give you a current address or asks you not to send this form, that’s a red flag that could indicate they are not operating their business according to federal laws, and you should find a different contractor.

6. Sign a contract.

A contract is an agreement between you and the independent contractors you hire. It contains details about the project such as the timeline for deliverables, payment schedule and work expectations. It also includes a statement about the independent contractor’s status, a nonsolicitation clause and a right to terminate the contract for term violations. Because a contract protects you and the independent contractors you hire, only work with contractors who will sign a unique contract for every project.

7. Pay via invoice only.

Independent contractors will submit invoices to you when the job is finished. Only pay those invoices, not other expenses that are the independent contractor’s responsibility. At the end of the year, make sure the invoices you’ve paid coordinate with Form 1099-MISC.

Hire reliable independent contractors for your construction business when you use these seven tips. For more assistance, talk to your insurance agent or business consultant.

The theory of respondeat superior makes employers vicariously liable for wrongful acts committed by employees during the course and scope of their employment. However, the “going and coming” rule generally exempts employers from liability for wrongful acts committed by employees while on their way to and from work, because employees are said to be outside of the course and scope of employment during their daily commute.

A well-known exception to the going-and-coming rule arises if the use of the car gives some incidental benefit to the employer. Thus, the key issue becomes whether the employer derives an incidental benefit from the employee’s use of the car. This has been referred to as the “required-vehicle” exception. The exception can apply if the use of a personally owned vehicle is either an express or implied condition of employment, or if the employee has agreed, expressly or implicitly, to make the vehicle available as an accommodation to the employer, and the employer has “reasonably come to rely upon its use and [to] expect the employee to make the vehicle available on a regular basis while still not requiring it as a condition of employment.”

For example, Section 401.011(12) of the Texas Labor Code, which codifies this general rule, states:

Course and scope of employment means an activity of any kind or character that has to do with and originates in the work, business, trade, or profession of the employer and that is performed by an employee while engaged in or about the furtherance of the affairs or business of the employer. The term includes an activity conducted on the premises of the employer or at other locations. The term does not include:

(A) transportation to and from the place of employment unless:

the transportation is furnished as a part of the contract of employment or is paid for by the employer; the means of the transportation are under the control of the employer; or the employee is directed in the employee’s employment to proceed from one place to another place; or

(B) travel by the employee in the furtherance of the affairs or business of the employer if the travel is also in furtherance of personal or private affairs of the employee unless:

• the travel to the place of occurrence of the injury would have been made even had there been no personal or private affairs of the employee to be furthered by the travel; and
• the travel would not have been made had there been no affairs or business of the employer to be furthered by the travel.

In insurance policies, the general definition describes coverage, and travel must meet both its components to be in the course and scope of employment. Subsections (A) and (B) are exclusions, each followed by exceptions. Subsection (A) has three, disjunctive exceptions; if any one is met, the exclusion does not apply, and travel to and from work is not excluded from the course and scope of employment. Subsection (B) has two, conjunctive exceptions and applies unless both are met.

Subsection (B) is somewhat convoluted. More simply put, it does not exclude work-required travel from the course and scope of employment merely because the travel also furthers the employee’s personal interests that would not, alone, have caused him to make the trip. A recent California case, Lobo v. Tamco, 182 Cal. App. 4th 297 (Cal. App. 4th Dist. 2010) , interpreted this standard very broadly. Here are the facts of this case:

“Daniel Lobo, a San Bernardino County deputy sheriff, was killed on October 11, 2005, as the result of allegedly negligent operation of a motor vehicle by defendant’s employee Luis Duay Del Rosario, while acting in the course and scope of his employment by defendant Tamco. Del Rosario was leaving the premises of his employer, Tamco. As he drove his car out of the driveway and onto Arrow Highway, he failed to notice three motorcycle deputies approaching with lights and sirens activated. Deputy Lobo was unable to avoid colliding with Del Rosario’s car and suffered fatal injuries.

“Deputy Lobo’s widow, Jennifer Lobo, filed a wrongful death suit on behalf of herself and the Lobos’ minor daughter, Madison. Kiley and Kadie Lobo, minor daughters of Deputy Lobo, filed a separate wrongful death action through their guardian ad litem. Both suits alleged that Del Rosario was acting within the course and scope of his employment by Tamco at the time of the accident.

“When Del Rosario left Tamco on the day of the accident, he was going home. However, if he had been asked to visit a customer site, he “would have gotten in [his] car and used [his] car to go to that facility,” just like on any other day. He kept boots, a helmet, and safety glasses in his car.

“This evidence is clearly sufficient to support the conclusion that Tamco requires Del Rosario to make his car available whenever it is necessary for him to visit customer sites, and that Tamco derives a benefit from the availability of Del Rosario’s car.

Tamco, however, emphasizes that it was rare that Del Rosario visited customer facilities or jobsites, and contends that in all cases in which the “required-vehicle” exception to the going and coming rule has been found applicable, driving was an “integral” part of the employee’s job and that Del Rosario’s occasional use of his own car to visit customers is insufficient as a matter of law to invoke the exception.

“Tamco has not cited any case in which a court has addressed a contention that the employee’s use of his own car was too infrequent to warrant application of the exception and we have found none. “

Lesson learned. Realize that allowing employees to use their personal vehicles on company business can expose you to liability. Make sure that employees know the parameters and have good driving records, and make sure there is plenty of insurance to handle any possible claims.

In October 2010, a construction worker in Pennsylvania was crushed to death by a section of a steel plate. The month before, a worker in Houston died when a pallet carrying a one-ton load struck him. In Maryland, two bar joists fell off a stack of joists on a flatbed truck, killing a worker.

The U.S. Occupational Safety and Health Administration reports that material handling accidents account for hundreds of thousands of injuries each year on construction sites. Safe material handling practices can prevent much needless suffering and also save contractors and their insurance companies millions of dollars in medical and disability benefit costs. These practices involve three distinct areas: Safe handling, safe storage and disposal.

Safe handling of construction materials involves several measures, including:

• Properly securing all materials that are stored in tiers. Pipes, steel beams, poles and other heavy materials can slide or tilt if they are not stacked and blocked adequately, allowing them to potentially fall on workers.
• Keeping combustible and flammable materials in fire-resistant containers.
• Determining and prominently posting the maximum safe load limits of floors where materials are stored, and taking care not to exceed those limits.
• Maintaining clear and sound aisles and passageways for moving materials.
• Constructing ramps or graded walkways between work areas on different levels to make accidents and spills less likely.

Improperly stored material can shift or topple over, causing potentially serious injuries.

Sound storage practices required by OSHA include:

• Stacking bricks in piles no more than seven feet high, with every layer above four feet tapered back two inches for every foot. While masonry blocks can be stacked in taller piles, but contractors should also taper the piles above the six foot mark.
• Limiting stacks of lumber to 20 feet high (16 feet if workers will handle lumber without machines) in stable piles on level sills that provide good support. Prior to stacking, remove all used nails.
• Keeping materials more than six feet from hoistways.
• Not storing materials in floor openings. Storing materials more than 10 feet from an exterior wall that is shorter than the top of the pile.
• Not storing materials on scaffolds or runways unless the contractor is about to use them.

In the hurry to get the job done, workers often dispose of construction debris in unsafe ways, such as tossing pieces of lumber off the side of the building. This risks injury to anyone standing below.

Contractors should follow these guidelines for proper waste disposal:

• Remove all scrap, especially combustible materials, as it accumulates instead of letting it pile up. However, do not remove it until workers are certain that the people working over their heads are finished tossing it to the ground.
• Use an enclosed chute to drop debris from the higher points of the building.
• Barricade areas where workers will drop debris without using a chute.
• Use separate containers for materials covered with oil or flammable liquids.

An insurance company’s loss control department may have resources available to assist contractors with improving material handling. Those who want this help should check with their agents to arrange a meeting. Sound material handling practices help prevent injuries, fines and penalties, and reduce workers’ compensation costs. They will also enhance the employer’s reputation with potential employees. Putting these safeguards into place makes both moral and practical sense.

As an artisan contractor, you have invested years in perfecting your craft. Protect your professional reputation, personal assets and business future with artisan contractor insurance.

Who is an Artisan Contractor?

An artisan contractor performs a single trade or job. Examples include:

• Cabinet Installers
• Drywall Installers
• Electricians
• HVAC Contractors
• Interior Decorators
• Landscapers
• Masons
• Painters
• Paperhangers
• Plumbers
• Roofers
• Tree Surgeons
• Tile Setters

What is Artisan Contractor Insurance?

Insurance protects your business, your work and your assets whether you own an artisan business or work as an independent contractor. Because your needs may vary between projects, consider these common types of artisan contractor insurance coverage options.

Liability Insurance

Despite your skill, accidents happen on the job site and as you perform your duties. Liability insurance covers expenses if you are sued. A general liability or more specific liability policy can cover:

• Property damage
• Personal injury
• Negligence
• Products
• Cyber liability and data breaches
• Employment practices
• Owners and contractors protection

Workers’ Compensation Insurance

As an artisan contractor business owner or a self-employed artisan contractor, you should purchase Workers’ Compensation coverage. It’s usually a requirement if you employ three or more employees, and some general contractors only hire independent artisan contractors who show proof of Workers’ Compensation. Check with your insurance agent for details.

Property Insurance

Your business premises are insured under a property insurance policy. This policy can include an office you own or any permanent additions or upgrades you make to a rented office or business property.

Floaters Insurance

The valuable machinery and equipment you own or install requires its own insurance. Purchase floaters insurance to cover items such as your hand or power tools and air conditioning units or wallpaper as you transport, install and test them. You can purchase this insurance for a single job or report each new contract to your insurance agent.

Business Vehicle Insurance

In most cases, your personal auto policy will not cover your business vehicle. A business vehicle insurance policy provides you with adequate coverage in case you’re involved in an accident or cause property damage while operating your work vehicle.

Umbrella Liability Insurance

While you may have adequate liability coverage in place, consider purchasing an umbrella liability policy that stretches your insurance coverage. It can provide up to $5 million in additional protection that protects your business and personal assets.

Artisan contractor insurance is essential. Be sure to talk to your agent about your specific needs. Then purchase a customized policy with adequate coverage that protects your business.

Welders can use over 100 different processes to join or cut metal. As a welder, you work around hot metals and tools in a variety of hazardous locations. To protect yourself, your business and your personal assets, purchase welders insurance.

Types of Welders Insurance

Insurance for welders includes general liability and other options. Understand the types of welders insurance available to you as you select the coverage that meets your unique needs.

General Liability

General liability gives you a variety of protections. It also grows with your business as you expand services, land larger contracts or hire employees.

Bodily Injury

If a customer visits your shop and is burnt by a flying spark or touches hot metal, your bodily injury insurance will cover related medical expenses.

Medical Expense Limit

Customer injuries sometimes don’t require extensive medical treatment. Medical expense limit coverage pays for related injuries and allows you to avoid admitting any fault for the injury.

Property Damage

While welding a customer’s boat, sculpture or metal barn, you may damage it. Property damage insurance pays to repair the damages or replace the damaged property.

Products and Completed Operations Coverage

The welded products you create, manufacture or sell could injure a customer or cause someone to get sick. Products and completed operations insurance covers any related medical care.

Personal and Advertising Injury

Someone could claim that you stole their intellectual property or made false accusations or slanderous statements about them. Personal and advertising injury insurance covers lawsuits related to these charges.

Damage to Premises Rented to You

Many welders own their own shop, but you may occasionally need to rent work space. If you damage that space, you are responsible to pay for repairs. Rental damages liability coverage pays these expenses.

Business Owners Policy

Also known as BOP, a business owners policy is customizable coverage for your specific business. Options you can choose include:

• Buildings and Contents for a stationary or mobile shop
• Business Income and Extra Expense
• Electronic Data
• Employee Dishonesty Coverage for fraud or theft
• Equipment Breakdown
• Newly Acquired or Constructed Buildings

Business Auto Insurance

Cover the vehicle you use for work with your business auto insurance. It covers property damage and bodily injuries if you or an employee is involved in an auto accident while driving your business vehicle.

Workers’ Compensation Insurance

Protect your employees with Workers’ Compensation insurance. It pays for medical and other expenses if an employee suffers a work-related injury or illness. This insurance could also be required if you work as a self-employed, independent contractor.

Welders insurance protects your business and assets. Discuss your business needs with your insurance agent as you purchase adequate insurance coverage.

Jacqueline Butler did not receive a promotion from the Texas law firm where she worked, and she suspected that her race had something to do with it. In July 2001, she filed complaints with the Texas human rights commission and the federal Equal Employment Opportunity Commission. The EEOC notified the employer, who responded a month later.

The following spring, the EEOC informed Butler that she had the right to sue the employer, which she promptly did. In turn, the employer made a claim with the company that provided its Employment Practices Liability insurance. Four weeks later, the insurance company denied the claim; the employer had no choice but to pay for its own legal defense and any potential settlement. In 2006, the employer sued the insurance company for the costs of its defense, but a federal court in 2007 upheld the claim denial.

Why did the employer’s insurance not pay for a discrimination claim? Because the employer took too long to submit it.

A typical policy requires the insured to give the insurer notice of any claims made against it “as soon as practicable.” In the Texas case, the policy went further — it required written notice to the insurer “as soon as practicable and in no event later than sixty (60) days after such Claim was first made.” The insurer maintained that Butler made her claim in July 2001, when she filed complaints with authorities.

As evidence, it cited the policy’s definition of a “claim” as “any judicial, administrative or other proceeding against any Insured for any Employment Practices Wrongful Act.” Since the complaints filed with the authorities initiated administrative proceedings, the insurer held that they also constituted a claim. In the insurer’s opinion, the policy did not provide coverage if the employer did not give notice within 60 days of when Butler filed the complaints.

The employer argued that, since it notified the insurer within 60 days of receiving notice of the lawsuit, it had complied with the policy’s conditions. However, the court agreed with the insurer.

Insurance companies do not include this language in their policies simply to get out of having to pay claims. The sooner they know about events that might involve coverage, the better they can investigate and prepare legal defense. As time elapses, witnesses’ memories become less reliable, or witnesses might move away, and memos, e-mails, and other types of evidence might become hard to find.

Also, a claimant who has been kept waiting for a length of time might become angry and unwilling to negotiate a settlement. Therefore, even without a firm 60-day deadline, an insurance company might deny coverage when the insured fails to give prompt notice of a claim.

Courts have not developed a standard for what is “prompt” notice, but they normally consider three questions: How long was the delay? What are the reasons for the delay? How does the delay affect the insurer’s ability to handle the claim? Sometimes, a court will excuse a late notice if it decides the insured had a reasonable basis for believing it was not liable for any harm. However, in a situation where an employee has filed complaints with authorities, the court might not agree that such a belief was reasonable.

The safest course for employers is to notify their insurance companies or agents as soon as they become aware of any type of employee complaints to outside authorities. Even if the employer believes the charges to be groundless, it should put the company on notice. Our professional insurance agents can advise you on what the policy requires it to do when a charge is made. The best time to have that discussion is before something happens.

Any construction project is multi-faceted and usually requires a variety of workers, equipment and skills. Construction bonds help to ensure the project is finished properly. Know the different types of construction bonds before you start your next project.

What are Construction Bonds? 

Construction projects of a certain size, type and duration as well as most government and public works projects require construction bonds. Contractors purchase bonds from a surety company. The cost of the bonds depends on the project’s risk and the type and amount of bond required.

You may sometimes hear the term “contract bond” used interchangeably with the term “construction bond.” A contract bond guarantees the fulfillment of a project contract. While contract bonds can be used in any industry, they’re most common in construction.

Different Types of Construction Bonds 

There are several different types of construction bonds.

Bid Bonds

Contractors typically submit bids on projects. Bid bonds ensure the contractors have the funds and financial credentials to accept and complete the job if their bid is accepted. It can also allow the developer to recoup certain costs if the highest bidder retracts the bid or declines the job.

Supply Bonds

Contractors rely on materials, equipment and other supplies when working on a construction project. Supply bonds reimburse the purchaser if the suppliers do not provide the items as listed on the purchase order.

Maintenance Bonds

Upon completion of a project, the owner expects the workmanship and materials to last for a specified time. Maintenance bonds cover any necessary repairs if there’s a defect.

Performance Bonds

After a contractor is awarded the project, performance bonds ensure the contract is fulfilled properly. If it’s not, the project developer can file a claim against the performance bond and use those funds to pay a second contractor to finish the job. Performance bonds are usually purchased for federally funded projects that exceed $100,000.

Payment Bonds

Unfortunately, a lead contractor may go into bankruptcy during a project and be unable to pay subcontractors, suppliers or other workers. Payment bonds cover those services. These bonds are often issued alongside performance bonds because they’re also required for federally funded projects that exceed $100,000.

Subdivision Bonds

Contractors who build or renovate structures within a subdivision will need subdivision bonds. They ensure the sidewalks, waste management systems, streets and other public structures are built according to specification. Otherwise, the bond will pay for the project to be finished properly.

Site Improvement Bonds

Renovation projects to existing properties or older structures are fulfilling but can be challenging. Site improvement bonds ensure these projects are completed properly.

Construction bonds are essential for many projects. Discuss your needs with your insurance agent as you ensure you’re covered with the right bonds for your needs.

The ideal workplace inspection isn’t one that follows a safety incident, or a surprise visit from OSHA – it’s the inspection that you arrange yourself!

Self-inspection audits offer the most effective way to improve safety management, prevent accidents, and ensure compliance with safety regulations.

Work area inspections will: 

Evaluate compliance with safety and health policies and procedures

Demonstrate your concern for employee safety and health 

The Occupational Safety and Health Act requires periodic evaluation of workplaces. The timing of self-inspection audits depends on the type of work areas involved. Very hazardous areas might require formal, weekly inspections, while office areas might need only a monthly inspection.

Supplement scheduled inspections with informal daily walkarounds, targeting areas that have had more than their share of safety problems. Follow up to make sure that previously identified problems have been fixed effectively. Use checklists (preferably written) for every inspection.

Although management needs to take the lead in work area inspections and is ultimately responsible for making sure action is taken to correct problems, make sure to involve employees. Work area safety inspections provide a great training tool and an effective way of motivating employees to work more safely.

Here are a few ideas for getting workers involved in self-inspection audits: 

Ask workers to help develop inspection checklists for their work areas.

Share the results of work area inspections with all employees in weekly safety meetings. 

Safety is all about awareness and knowledge. Knowledge gives you the power to prevent accidents. One of the best ways to keep informed about ever-changing work area conditions is to perform routine safety inspections. Don’t wait for an accident to find out about a hazard that could have been corrected!

Rock haulers carry loads of rocks between locations. They may haul rock from one area of the quarry to another or drive on the road as they deliver rocks to and from construction sites. Purchase rock hauler insurance to protect yourself, your truck, your business and your assets.

Why You Need Rock Hauler Insurance 

The trucks that haul rocks are typically heavy-duty commercial vehicles. They could weigh as much as 55,000 pounds before they’re loaded. Rock hauler drivers are trained professionals who are skilled at operating the truck. However, there are dangers in rock hauling.

• The trucks are heavy and require longer stopping distances, especially in inclement weather.
• Back-up accidents are common due to limited visibility.
• The large trucks could easily roll over under certain conditions.
• The load of rocks can shift or escape the truck and cause property damage or physical injuries.

Because of these potential hazards, rock hauler insurance is essential for operators. Whether you own and operate a single truck, drive for a delivery company or own a fleet of rock haulers, protect yourself and your assets with insurance. It covers your liability in the case of an accident.

What is Covered by a Rock Hauler Insurance Policy? 

When purchasing a rock hauler insurance policy, look for a comprehensive policy. It can include:

• Primary liability for at-fault injuries or damages the truck causes to other people or property.
• Physical damage if the truck is damaged from a collision, overturn, vandalism, fire or other peril.
• Medical payments or personal injury protection for the driver or passenger’s medical and other expenses if they are injured during an accident.
• Pollution due to greater emissions from large trucks.
• Workers’ Compensation for truck operators.
• General liability for injuries or property damage that occur on your premises.
• Umbrella coverage that safeguards your assets.
• Cargo coverage for the load.

Always be sure to purchase enough coverage to meet your state’s requirements. If you haul rocks to other states, purchase adequate insurance to meet their requirements, too.

How Much Does Rock Hauler Insurance Cost? 

Expect to pay between $4,000 and $14,000 annually for rock hauler insurance. Your premium will depend on several factors, including:

• The amount and types of coverage you purchase
• How many trucks you insure
• Where you operate the trucks
• The driver’s history and experience

While price is a consideration when purchasing insurance, it’s more important to purchase adequate coverage that protects your business and assets.

Contact your commercial insurance company to discuss rock hauler insurance. You’ll receive a customized quote that’s based on your personalized needs and offers adequate protection