Be Careful Not to Save Now, Just to Pay Later
By Judythe Ann Minale, Capstone Brokerage Risk Manager, October 18, 2017
A construction business can end up facing considerable consequences if it finds itself in a situation where the insurance program is insufficient in respects to coverage and defense. Sometimes the price of a project at the time of bid, will end up having a considerable upswing, due to many inherent costs that can be added on due to litigation that surfaces years after the job is done.
While it is essential that all businesses exercise prudent risk management, and be mindful of the contracts they enter into, the construction industry in particular needs to be especially careful due to the inherent risk transference of the industry. Construction Company’s must always be on high-alert in respect to assessing and re-assessing risk. In order to pay particular attention to the infinite number of variables that can be hidden within the contract wording of not only the contracts they sign, but also the insurance wording in the policies they purchase or in some cases are purchased on their behalf.
Equally important are the laws that apply, including both state and federal laws, which can affect the outcome of the aforementioned litigation that might surface. Those familiar with the construction industry in Nevada have seen how legislation changes can have a deep impact on their overall business costs. Something as simple as how construction defect is defined can have serious consequences for contractors. Therefore, it is imperative that businesses stay abreast of the legislative climate and exercise their voice to ensure their businesses are not blindsided when it comes to insurance claims being covered or insurance premium increases. These can result due to poor loss experience that has very little to do with their insufficient work but rather the result of assumed responsibility and risk transference.
A comprehensive risk management plan, for a construction client, includes not only contract review, but also includes surety bonding and insurance requirements. Insurance policies available include workers’ compensation, builder’s risk, architect & engineer’s liability, commercial general liability, pollution liability, among others. Commercial general liability (CGL) policies provide coverage for contractors, arising out of events from their completed construction operations.
Quality general contractors know that sometimes the best sub-contractor for the job does not necessarily have anything to do with the lowest bid. The same goes for the best insurance program. Price is just one factor to consider when it comes to putting together a qualitative insurance and risk management plan.
A knowledgeable broker can assist those int he construction industry with an in depth risk analysis of their projects. Be sure to stay in contact with your agent, broker and insurance company to establish proper and adequate coverage.
