All businesses come with a certain degree of risk—some more than others. For example, the construction industry faces much more risk than a standard desk job. Loss of finances, personal injury, and property damage are just some of the upfront hazards construction companies face. After completing a project, construction businesses may experience other claims such as building defects. While these hurdles are part of doing business in the construction industry, there are several ways companies can reduce their risk.
Contract Hierarchy of Documents
Because of their length, construction contracts are prone to inconsistencies. In the event that an issue goes to court, both parties often have documentation backing their position taken straight from the contract. Without establishing a contractual hierarchy, disputes are more likely and the litigation process will be lengthy. Clarify such matters before finalizing a contract to avoid conflicts that a court cannot easily resolve.
Limitation of Liability
Most design professionals such as architects and engineers include clauses that limit their liability in regards to their services. Many project developers sign these agreements not realizing the designer may be responsible for significant economic loss later in the project. The developer will not be able to recoup the loss caused by the designer’s negligence due to this clause. Developers should read over these agreements carefully and consider the risk before signing it.
Insurance is vital to a successful construction company. Insurance flows between general contractors and subcontractors with policies providing additional coverage. However, in response to increased risk, insurance companies added endorsements. These endorsements can limit the effectiveness of additional coverage. Due to these complexities, construction companies should invest in a knowledgeable agent to ensure they have proper coverage. The Reilly Company can help your business navigate the intricacies of construction insurance. To learn more, contact us.
The large number and wide array of employees and contractors involved in the operation of a construction business creates extensive risk exposure. With the right coverage, construction companies can significantly reduce the financial risks associated with construction sites and the people who work in them and live around them. These risks include:
- Damage to company property or equipment
- Injuries or property damage caused to others not affiliated with the company
- Income loss due to business interruptions such as fires or severe weather
- Employee injuries that occur on the job
What are the critical components of construction insurance?
Construction insurance usually consists of multiple policies working in concert to protect a business. Failing to invest in the appropriate policies can make the difference between a profitable project and a losing investment. Further, insufficient coverage can bring about situations that damage both reputation and credibility. Some of the most common construction coverages include:
- General liability insurance. This provides coverage if a company injures an individual or damages another person’s property.
- Professional liability insurance. Sometimes called errors and omissions insurance, this provides coverage for if a client files a claim related to consultation services, advice, and so on provided by a construction company.
- Loss of income insurance. This coverage accounts for loss of income due to business interruptions.
- Workers compensation. Laws often dictate that construction companies invest in this type of insurance. It provides coverage in the event that an employee is injured on the job.
- Builders risk insurance. This functions like construction liability insurance. This type of insurance encompasses any on-site damage. Some policies include tools and materials as well.
- Commercial vehicle insurance. If a construction company uses trucks or vans for business purposes, they need this type of insurance. It provides coverage in the event of personal injury or property damage caused by company vehicles.
Investing in the right type of insurance is vital to maintaining a successful construction company. However, navigating which policies your company needs and how much coverage to invest in can be difficult. The Reilly Company Group can help you determine which policies are best for your business. To learn more about utilizing construction insurance to reduce risk, contact us today.
General contractors often hire subcontractors to help them with work they cannot do but are ultimately responsible for completing. For example, a general contractor may hire a subcontractor to do the wiring and electrical or the plumbing for a home. Subcontractors need to know when certain events require them to use their own general liability insurance to cover claims versus when they can rely on their general contractor’s builder’s risk policy.
Why is this important? Knowing which damages fall under the scope of which policy can help subcontractors avoid making unnecessary claims against their own policy. If subcontractors make claims too often, they can see an increase in their insurance premiums.
Which Policy Covers What Damages?
General contractors purchase builder’s risk insurance to protect the structure, materials, and equipment they use to build. Policies vary, but they often cover damage related to:
- Certain weather events
Most builder’s risk policies provide coverages for damages related to outside events rather than issues related to the construction work itself. However, some policies are all-risk. This means the policy covers a wide variety of damages except those clearly omitted—this means the policy can cover damage caused by subcontractors.
General contractors require their subcontractors to have general liability insurance as well. This acts as a safety net for general contractors because they are responsible for their subcontractor’s work. General liability policies provide coverage for:
- Property damage
- Slander, libel, etc.
General liability policies kick in when the claim occurred in a covered location such as the worksite and the subcontractor is obligated by law to cover the damages. This policy can also provide coverage for legal fees as well in the event that the claim goes to court.
The ambiguity derives from the fact that both policies can technically cover damages caused by the subcontractor. The Reilly Company can help subcontractors untangle the subtle nuances between these types of policies. Contact us today to learn more about builder’s risk and general liability policies.
Most construction companies know they need several types of insurance to protect their business, projects, workers, and more. There tends to be a heavy focus on general liability and workers’ compensation. However, there is a lesser-known risk that construction companies must consider: environmental damage.
Failing to address this issue can land businesses in court over damages their company inflicted on the environment. The Environmental Protection Agency (EPA) considers construction as a major source of pollution and subsequent damage. As a result, they view engineers, general contractors, subcontractors, and even architects as suspect in regards to pollution damage.
Things to Consider
Construction companies should not take concerns about litigation lightly. The potential for a lawsuit is all too real and can bankrupt smaller businesses. Other reasons to consider environmental insurance include:
- Most liability policies (general and professional) do not provide coverage for claims related to pollution.
- Even the most environmentally conscious construction crew can have a chemical spill or puncture an underground pipeline. Accidents happen and companies need to protect themselves from inadvertent releases of hazardous materials.
- Improper disposal of hazardous materials can result in public exposure and illness.
- Drainage issues at construction sites can contaminate local water due to runoff.
Having environmental insurance can protect construction companies in the event of a lawsuit. Most policies provide several coverage options that business owners can choose from to best suit their risk level. The construction industry is litigious; construction business owners need to protect their investment by reducing their risk. To learn more about environmental insurance, contact The Reilly Company.
As American re-urbanization continues, city buildings must expand in size to accommodate the increasing population density. More people means more pressure on the city’s infrastructure, including sewer systems. But how does this affect construction businesses?
Construction insurers are seeing a variety of water-based claims. For example, claims regarding water running backward up pipes and damaging roofs are not uncommon. Insurance companies believe this is because low-rise buildings are now expanding into multiple stories. The added construction calls for greater water usage, but the sewer system cannot always keep up with this demand. For example, major storms usually cause problems because the water has nowhere to go. The increased water damage results in increased claims.
The growing number of water claims can create challenges for construction companies of many shapes and sizes. In addition to urban density issues, climate shifts have made it more difficult to anticipate drainage needs in a given area. Non-frame related risks now include water damage as the biggest threat. Another major concern is sewer backup. Because this is a new issue, many construction companies are unfamiliar with the water problems that can plague their site.
The best way to reduce your construction company’s risk is to create a proper risk management plan. The Reilly Company Group can help you evaluate your risk to determine what level of coverage your business needs as well as develop and implement a risk management strategy. Contact us to learn more.
Construction insurance provides a variety of coverages to meet specific needs. This can include a business owner’s policy (BOP), workers’ compensation insurance, commercial vehicle coverage, employment practices liability, and more.
Business Owner’s Insurance (BOP)
This protects your business from legal claims and business interruptions. It often provides general liability and loss of income coverage as well. Some examples of covered events include injuries on your property, property damage, and loss of income due to business interruptions like building or equipment damage.
Workers’ Compensation Insurance
If an employee becomes ill or injured while on the job, they may file a workers’ compensation claim. This type of insurance helps pay for medical bills and lost wages. This type of insurance is mandatory in some states. It protects both the employee and the employer from unexpected medical costs.
Commercial Vehicle Coverage
This is typically an essential coverage for businesses in the construction industry. Your power units are crucial to getting the job done. From parts to theft to liability, protecting them protects you.
Employment Practices Liability
Employment practices liability protects you and your organization from massive exposure to liability in the event that a current or former employee pursues legal action. This legal action can come in many forms, and can prove costly to your bottom line and your reputation without the appropriate resources in place.
Legally Mandated Coverages
The legal requirements for construction coverages vary from state to state. Several factors inform the coverage requirements and costs, including where and when your business operates as well as the total number of employees. Contact The Reilly Company to learn more about construction-specific coverages.