Have You Checked Your Insurance Coverage Lately?

Contractors should expect much more from their insurance brokers than to simply negotiate pricing and terms and conditions for their insurance programs. Safety, claims management, contractual risk transfer support, bid and accrual support, loss sensitive adjustment forecasting, construction effect allegations and much more are all important elements of a successful risk transfer program. Unfortunately, insurance brokers with insufficient experience and knowledge can either misunderstand or not even be aware of these critical elements. The result is often financially painful or even ruinous to the contractor.

This is why it is critical for you to work with an insurance broker who understands every component of your operations, along with all elements of the insurance paradigm. “Off the Shelf” construction insurance and risk management programs are usually insufficient to meet your needs.

We recommend checking your coverage with a trusted professional. It is much better to have invested in recurring reviews prior to an insurable event.

· Contractual Risk Transfer – Vicarious liability describes what happens when a person or entity is or can be held legally liable for the results of another person’s or entity’s actions. Contractual risk transfer is the least expensive way to transfer and reduce vicarious liability for contractors who seek to avoid financial costs resulting from bodily injury or property damage to a third party caused by a subcontractor. A trusted broker can assist with creative ways to reduce exposure to those organizations where a contractual relationship exists. Whether you have the leverage to pass your negligence to a subcontractor or you are forced to absorb the risks of the entire chain of players, your broker can help you measure and minimize your exposures.

· Job Pre-Qualifications – Owner/municipality contract requirements are becoming more and more complicated and comprehensive. The insurance program of a General Contractor should be negotiated to ensure compliance without asking. Your broker’s goal should be to decrease the amount of friction associated with this process so you can do what you do best – focus on your business.

· Bid & Accrual Support – This activity needs to be done quickly to meet strict project deadlines. Bid accrual and support assists the insured in pricing its products and services. The broker should also be prepared to assist the insured in projecting the impact of business changes on insurance costs.

· Loss Sensitive Adjustment Forecasting – This forecasting activity of how a loss sensitive program changes at various loss levels assists the insured in budgeting costs and cash flows.

· Design Risks – Contractors are increasingly assuming more design responsibilities on projects using new delivery methods. While this is good news along with the additional project influence, new risks to the contractor must be analyzed.

· Construction Defect Allegations – These types of allegations, which include those involving subcontractors, mold and EIFS, need to be understood and addressed. Different carriers have different positions on these issues with drastically different levels of protection. Your broker must understand and explain to you where your carrier stands regarding these issues before an insurable event occurs. They can then make necessary adjustments.

· Workers’ Compensation Exposures – Workers’ compensation insurance provides for medical care and rehabilitation costs for injured workers, as well as lost wages and death benefits for the dependents of persons killed in work-related accidents. These exposures need to be analyzed in detail to identify root causes of loss and uncover new practices and programs to avoid future injuries.

· Mobile Equipment and Installation Floater – These insurance programs need to be designed to meet the needs of each construction company’s unique operations.

· OCP, Railroad Protective, or Builders Risk – These quotes need to be turned around quickly so the insured can include accurate costs and coverages in bids.

· Safety & Loss Control – Is your broker assisting with your safety challenges? Does your broker understand the myriad challenges surrounding the safety of your employees and customers? The US Bureau of Labor Statistics has recorded an average of 4,500 annual workplace fatalities during the past several years. These deaths and far more injuries exert egregious personal and financial losses on affected workers, their families and businesses. In addition, they affect a firm’s Workers’ Compensation Insurance costs. Your broker should work with you to include safety in your service plan, so as to improve loss mitigation programs and safety culture across your entire organization.

· Claims Advocacy – Your broker must make sure your claims are handled with a sound resolution strategy to meet your goals and objectives. He or she should understand and overcome the communication challenges associated with claims. The claims process is where “the rubber meets the road” when transferring risk to insurance products.

· Experience Mod Projections – These projections help to inform the insured regarding the impact experience modification factor will have on Workers’ Compensation premiums. Predictability of information leads to better decision-making
· Better Collaboration and Access to Improve Total Control – You should be able to prepare your own Certificates of Insurance for your bids/customers on a 24/7 basis anywhere in the world, while also being able to access your insurance information at any time.

· Mid Term Stewardship Reports – Your risk management outsourcing partner – a/k/a your trusted broker – should at a minimum commit to issuing mid term stewardship reports to demonstrate it is focusing on areas important to you – a/k/a the insured – and to make sure if there is a mid policy year correction, it can be made efficiently.

· Contract Reviews – Your broker should exceed compliance requirements by including the comprehensive contractual risk transfer analysis in the contract review. Also, if your broker can demonstrate to the underwriter how your risk is being transferred contractually, you can benefit from reduced rates and broader coverages for your organization.

Bob Dietzel is co-founder and principal of KMRD Partners, Inc., a risk and human capital management consulting and insurance brokerage firm with locations in the Philadelphia region serving clients worldwide.

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