STEPPING OUT OF THE INSURANCE BOX

Every construction company is different. Each company has its own corporate identity and its own way of doing things. Insurance programs that take a cookie-cutter approach to risk exposures do a pretty good job at defining and including coverage for a majority of construction exposures that can create a claim.

Insurance is a multi-faceted diamond, as is the construction company who creates risk exposures beyond the scope of every specialty insurance program. Reliance on the packaged deal may not completely fit the bill. While it may not be possible to anticipate every future loss, it is still important to take a hard look at what the company does and what it owns in comparison to the policy coverage purchased.

For example, a paving contractor who is working in a condominium development parking lot will buy a golf cart to move the condo owners back and forth to a temporary lot further away. This is a terrific idea, and it helps the condo owners cope with the paving process. However, it is not automatically covered so coverage must be added for this exposure not only because of the nature of the vehicle, but also how it is being used. In both cases, the auto policy needs to be endorsed to cover this new exposure.

The idea is to step outside of the specialty insurance package and look for things that can create losses that may not be covered. There are all types of things that can create a loss, and in most cases, there is a policy or an endorsement to provide needed protection from that loss. The key word here is needed. There may be an evident exposure that can create a loss, but do you want to insure it? Some companies are more risk averse than others. Some companies have deeper pockets and can afford to take on the risk of a loss. In either case, once a loss potential is discovered, it is up to the individual company to decide whether or not to insure it. (Unless it is a mandated coverage, then you have no choice but to insure it.)

Outside of the insurance package, there are many things with the potential to give you an unwanted surprise. Pollution can be a problem, particularly for grading and excavation contractors. While you are not bringing the pollutant to the job site, it is possible to hit an underground tank and release the contents which would contaminate the surrounding area.

Another contractor may bring a skid tank on site to fill equipment with diesel. That tank can release its contents because of an accident or vandalism. Any company can own property that was backfilled years ago with contaminated soil and unknown by anyone today.

There might be ownership of a building that was previously occupied but is now vacant two months after the tenant moved out. You might be a tenant in your building and add some improvements to it like a new bay or lift, new garage doors, or permanent storage racks for inventory. Then there is the flood exposure. Are you in a flood zone? Do you store your vehicles and equipment there in the yard? Do you have a flood policy? Does

BY MICHAEL PUGACZEWSKI

your contractor’s equipment floater cover flood? If so, where? Is there coverage in the yard and out at the job site? There are also earthquakes which affect certain regions worse than others. You can buy insurance for that as well.

Don’t forget your toys. There are boats, golf carts, antique cars, four wheelers, snowmobiles, and drones which can also be used in your business. There is special insurance for all of these things. Perhaps you own a 36-foot sport fishing boat and like to take customers out for a day of fishing. Check your business policy for coverage.

The commercial general liability policy covers losses triggered by bodily injury or property damage and, in some cases, loss of use claims. There are many other possible losses not related to these coverage triggers. Running a company, public or private, can give rise to claims for wrongful acts through mis-management, failure to perform contractual obligations, or discrimination, whether real or imagined. If you are offering a pension program, you may have fiduciary exposures of which you are unaware.

There is more, of course. There is medical insurance, life insurance, and many other insurances, but the intent is not to make you an insurance expert. The intent is to build an awareness of the things we do in our business every day that have the potential to expose the company to a loss. This loss may have a quick fix with a simple endorsement, or it may be a loss that you find reasonable to assume without insurance.

We suggest that you meet with your insurance professional and candidly discuss your operations, including all of the ancillary things you do relating to the company. As you identify potential loss exposures, talk about how you want to handle them. Make your decision to insure or not to insure, or find another way of dealing with the exposure, such as elimination. It is important to know how you are handling a loss before it happens rather than trying to figure out what to do after it happens.