Insurance Business America issue 6.08

Page 40



Building blocks of success

The construction sector continues to perform well, and insuring contractors is a good opportunity for brokers and agents prepared to go the extra mile ROBUST, COMPREHENSIVE insurance policies are crucial to the success of construction contractors. It’s a business with myriad risks and hazards, and insurance plays an important role in enabling contractors – many of whom are small or medium-sized business owners – to run their daily operations,

often be complex, due to the fact that the ISO commercial general liability form does not cover damage to a contractor’s own work. “That means if a contractor is accused of faulty construction, the CGL policy will only pay for resultant damage, and it will not pay to repair the actual faulty construction,”

“There are a lot more small to mediumsized contractors than there are really large contractors, and the vast majority of the smaller guys don’t have the means to retain the risks involved in construction” Billy Garren, Atlas General knowing they’re protected should an unfortunate event or accident occur. Unsurprisingly, given the nature of the work, job-site injuries and construction defects tend to be the most common claims in this space. Construction defect claims can


explains Samantha Fritch, senior associate broker at Worldwide Facilities. Legislation enacted in New York in 1990 has had a significant impact on claims in the construction space. When the state created its Scaffold Law, which altered workers’ compen-

sation ‘exclusive remedy’ laws, it made it much easier for employees to sue their employers in action over claims. “Since the change in the law, we have seen an increase in employee injury claims being paid out under the general liability policy, rather than the workers’ comp policy,” Fritch explains, “and a very hard market exists for New York construction.” Another trend in claims has been created by the increased use of wrap-up policies, which are also known as owner-controlled insurance programs [OCIP] or contractor-controlled insurance programs [CCIP]. These programs provide coverage for all contractors working on a project under one policy. However, in some cases, when limits are exhausted under wrap-up policies, suits are filed against material suppliers, such as flooring and window manufacturers. That has created an environment where building material suppliers are finding it difficult to secure commercial general liability coverage, especially if their materials are used in residential construction.

Complete coverage Construction can be an unpredictable business – no two jobs are ever the same. Even if contractors remain vigilant and implement thorough health and safety and risk management procedures, mistakes do happen. Not having adequate insurance in place can lead to financial devastation for contractors, their businesses and their employees. “There are a lot more small to mediumsized contractors than there are really large contractors, and the vast majority of the smaller guys don’t have the means to retain the risks involved in construction,” says Billy Garren, VP of Atlas General’s construction program. “Using a competent independent agent and attorney can ensure you are getting adequate coverage for your business and then properly transferring risk to other parties when appropriate.” Contractor’s policies are written to reflect the varied nature of the industry. Key coverage

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